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Tax Filling Post Divorce: Intricacies Involved
Divorce is accompanied by numerous alterations in the size of your family as also your liabilities. It is due to this aspect of divorce that your financial status can undergo substantial changes.
Mon, 01/10/2011 - 11:19 by Gunjan Mehra
The complexities of a recent divorce only seem to get magnified while filling for your taxes. The Money Times guides you on filling for taxes post your marital separation.
Alimony Payment
Alimony or spousal support is a flexible financial tool for divorcing couples. It offers tax advantages that can help put more cash in the pockets of both spouses. But there are various requirements that you have to satisfy with respect to alimony:
The payments must be in cash.
The payments must be provided for in a divorce or a written agreement
You can't claim alimony during any year for which you file a joint tax return.
Payment is not made during a time when you and your spouse live in the same residence. And carving out separate quarters in the same residence doesn't count. Different bedrooms don't count. Different wings don't count. You have to live in separate dwellings under different roofs.
The payments have to stop when the recipient spouse dies.
After finalizing your divorce, you would jointly need to consider numerous financial decisions including how you would now like to file for taxes with your new acquired marital status.
Before you do file your taxes, make sure you are aware with all the nitty-gritty of taxation.
Here is what you will need to understand before you can file for your taxes for the current financial year.
Know Your Filling Status
IRS standards prohibit you to file as a single until your divorce is final and you obtain the divorce decree. Until then you can file your taxes together.
Even once the divorce is obtained, the choice of whether or not to file taxes jointly is completely up to the two of you.
Though both parties to divorce must pay taxes in full, most couples decide to file them jointly due to the obvious financial benefits associated.
The tax liability comes out to be markedly lower if you file jointly rather than separately. So, it always turns out to be a wiser to file for your taxes jointly.
However, in case you have had the custody of your child and have stayed away from your house for the past six months or more during the current financial year, you become liable to get the ‘Head of the House’ status, which in turn enables you to file taxes at a much lower rate.
Get a New W-4 Form
When a divorce gets finalized it is important to get a new W-4 form from your employer before filling for your taxes.
This form is a must since it reflects your new found marital status as well as the kind of allowances that you are liable to be paid.
This new status under which you can file your taxes in the current financial year would either be that of the ‘Head of the Household’ or a ‘Single filler’.
Which status you choose will primarily depend upon various factors, including whether you intend getting remarried in the same financial year as that of your divorce and your mutual understanding with your ex.
Such a form must be obtained within a sealing period of 10 days of obtaining a divorce. In case the name of any of your family member has undergone any changes, you would also be required to fill in Form SS-5.
Report Alimony
You are required to report all your incomes as well as deductions. Alimony is one such payment that you will be required to report and reveal while filling for your taxes. Alimony or spousal support, refers to any financial aid between divorced couple, which is received by one from the other.
Alimony however is not the same thing as child support and hence any income received or payment made in the way of child support needs to be deducted from the total amount.
It is only the amount of alimony that must be reported in either condition. The exact amount of alimony is mentioned in the divorce decree, which must be referred to while determining the total amount for which you will be required to file your taxes.
Divorce doesn’t simply mean a change in your relationship status on Facebook, it is also accompanied by numerous alteration in your financial status. Be prepared for them!
