Tax problems
during and following a divorce are common, but they can be
minimized with a little planning and knowledge about tax law
and IRS procedures. This pamphlet explains some of the tax
consequences of a divorce, and recommends actions you may
need to take if you are obtaining a divorce. It provides general
federal tax information only. For any specific questions you
have about your particular situation, contact your lawyer
or the Internal Revenue Service.
Filing Returns
It is the responsibility of each spouse to ensure that
they have filed all appropriate tax returns or that they
have filed extensions, if necessary.
Responsibility for Tax Due
If you file a joint return with your spouse and later
obtain a divorce, you are still responsible for the tax
due on that return as a result of an audit, unless you make
a separate liability election. If you have tax liabilities
arising after July 22, 1998, or tax liabilities that arose
on or before July 22, 1998, but which remained unpaid as
of that date, you may be eligible to make a separate liability
election. A separate liability election can be made if,
at the time of the election, you are no longer married to,
are legally separated from, or have been living apart from
your spouse for at least 12 months and you have no actual
knowledge that an item on the return is incorrect. The election
limits your liability to the portion of the deficiency that
is attributable to items allocable to you. The election
must be made before the later of July 22, 2000, or 2 years
after the date of the first collection action by the IRS.
If no separate liability election is made, you are responsible
for the tax due on the return even if your divorce decree
states that your spouse is responsible for payment of taxes
and even though you may not have had any income on that
tax return. The IRS will determine each party's ability
to pay. If your former spouse is discharged from a joint
liability by bankruptcy or an accepted offer in compromise,
you are still responsible for any unpaid liability. If your
former spouse fails to pay taxes as ordered by your decree,
the IRS has the right to collect taxes from you. You may
be able to recover some or all of what you paid from your
former spouse. Your attorney may assist you.
Address Changes
If you change your mailing address, be sure to notify
the IRS. Use Form 8822, Change of Address, and send it by
certified mail to any Internal Revenue Service Office. If
you do not notify the IRS, you may not receive important
information mailed to your or you may receive it late.
Refund Checks
If a refund check for a joint return is due after the
divorce or separation, it will be mailed to the address
on the tax return. The IRS cannot split a refund check between
two people. If you suspect your signature has been forged
on a joint refund check by your former spouse, the IRS can
furnish a copy of the negotiated check for your examination.
You may request the copy by writing to any Internal Revenue
Service Office.
Refund Offsets
The IRS has the authority to apply your refunds to taxes
due for other years, debts to other Federal agencies, or
for past due child support or alimony. If a joint return
is filed and only one party is liable for the debt, the
other party is still entitled to his or her share of the
refund. For example, you file a joint return with your husband
who is delinquent in child support payments to his former
spouse. Both of you had wages and withholding reported on
the tax return. You may file Form 8379, Injured Spouse Claim
and Allocation, to receive your portion of the refund. See
the form for more information.
The divorce decree is an agreement between the divorcing
parties. Generally, it is not binding upon the IRS. However,
it can make further IRS contacts easier. Actions one takes
can affect the other. The divorce decree can also help avoid
problems by addressing filing status, exemptions, and deductions.
Ask yourself these questions:
Dependents
Who will claim your children as dependents on your future
tax returns? Each year a child can only be claimed as a
dependent by one of the parties. If the same child is claimed
as a dependent by both parties for the same year, it is
almost certain that each will get an inquiry from the IRS.
In general, the parent who has custody more than half of
the year may claim the exemption. The other parent may claim
the exemption if it is designated in the divorce decree
or if both parents complete Form 8332. See Publication 504,
Divorced or Separated Individuals, for more details. Each
party should have all dependentsŐ social security numbers.
Tax Records
Who will hold them? How will access by both parties
be assured? Determining a mutually acceptable location for
these records, and a procedure for accessing them, increases
the likelihood they will be available in the event of future
audits or to assist in future tax planning.
Filing Status
What filing status will you use? Filing status depends
partly on your marital status on the last day of your tax
year. Generally, married individuals may file jointly or
married filing separately. If you file jointly, you are
liable for the entire liability, even if it was the result
of the other spouseŐs income, unless you make a separate
liability election. For tax purposes, if you were separated
from your spouse for more than six months, you may qualify
as head of household. Unmarried individuals may file as
single or head of household.
Personal Residence
How will your divorce settlement affect your personal
residence? If your home is sold, there are rules concerning
the exclusion of gain from the sale of a home that has been
used as a principal residence for two of the last five years.
Your property settlement or temporary order of support may
affect the deductions you can claim for interest paid on
any home mortgage.
Attorney Fees
Are your attorney fees deductible? Generally attorney
fees for your divorce are not deductible, but there are
a few limited exceptions. You may be able to deduct legal
fees for tax advice, obtaining alimony, or for preservation
of taxable income.
Did you . . .
- Notify the IRS of new addresses for each partner to
the divorce.
- Obtain your former spouse's social security number to
claim alimony payments.
- Allocate the estimated tax payments made during the
last year before divorce.
- Consider your filing status
- Married Filing Joint
- Married Filing Separate
- Head of Household
- Notify the Social Security Administration of any name
changes.
- File Form 8379 if you are entitled to an Injured
Spouse Claim.
ADDITIONAL INFORMATION - IRS Publication 504, Divorced
or Separated Individuals, deals with tax rules on property
settlements, IRAs, alimony, and other topics affecting divorced
persons. To order this publication call 1-800-TAX-FORM (1-800-829-3676).
