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.
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.
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.
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.
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:
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 dependents' social security numbers.
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.
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 spouse's 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.
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.
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
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).