How Should I File My Taxes While Going Through a Divorce?

Posted in Divorce,Divorce Mediation,High Asset Divorce on February 29, 2024

You may be going through a divorce but still have to file your taxes. In this instance, do not delay getting your taxes done. If you do not file them in accordance with IRS guidelines, you face penalties. At the same time, you can prepare for your divorce proceedings and consider how you will file your taxes in the years to come.

How to File Your Taxes During a Divorce

Use your filing status as of December 31 of the tax year when you file. For example, if you were married as of this date, you can list your filing status as married on your tax return. You and your spouse may also file your returns jointly or separately.

If you submit your taxes as married filing jointly, you file a joint return with your spouse.

Comparatively, if you submit your taxes as married filing separately, you and your spouse each file your own return.

Benefits of Filing a Joint Tax Return

When you file a tax return with your spouse, you may be able to maximize your deductions.

For married couples filing jointly for tax year 2024, they can receive a standard deduction of $29,200. Previously, this deduction was $27,700 for tax year 2023.

Meanwhile, for a single taxpayer or those who are married but filing separately, the standard deduction for tax year 2024 is $14,600. This represents an increase of $750 from the prior tax year.

Based on deductions and tax credits, those who file a joint tax return may qualify for a lower tax bracket than they would if they submitted their taxes on their own.

Here are the IRS tax brackets for those who file taxes on their own or jointly for tax year 2024:

  • 37% for individual taxpayers with incomes greater than $609,350 or $731,200 for married couples filing jointly
  • 35% for incomes over $243,725 or $487,450 for couples
  • 32% for incomes over $191,950 or $383,900 for couples
  • 24% for incomes over $100,525 or $201,050 for couples
  • 22% for incomes over $47,150 or $94,300 for couples
  • 12% for incomes over $11,600 or $23,200 for couples
  • 10% for incomes of $11,600 or less or $23,200 or less for couples

Here is how these brackets look for those who submit their taxes independently or jointly for the tax year 2023:

  • 37% for individual taxpayers with incomes of more than $578,126 or $693,751 for married couples filing jointly
  • 35% for incomes over $231,251 or $462,501 for couples
  • 32% for incomes over $182,101 or $364,201 for couples
  • 24% for incomes over $95,376 or $190,751 for couples
  • 22% for incomes over $44,726 or $89,451 for couples
  • 10% for incomes of $11,000 or less or $22,000 or less for couples

Benefits of Filing Your Own Tax Return

You and your spouse are jointly responsible for each other’s tax liability if you file one return. Conversely, if you file your own return, you do not have to deal with anyone else’s liability for taxes. This may help you avoid penalties and interest that come up on your spouse’s return.

For example, you may have no income to report while your spouse earns all of the money for your family. In this example, it may be in your best interests to have your spouse file a separate return. This means your spouse is solely responsible for any penalties and interest associated with their return.

Tax Exemptions If You Are Going Through a Divorce

The Innocent Spouse Relief provision may protect you if your spouse files a joint return with errors on it. You may be able to take advantage of this provision if you do not believe you should have to pay any taxes on income your current or former spouse incurred. There are criteria you must meet to qualify for relief under this provision. An accountant may be able to help you capitalize on the provision and explain if they believe it is best for you to file your taxes jointly or independently.

IRS offers separation of liability relief that may allow you to avoid paying your spouse’s portion of understated taxes in a joint tax return. This applies if you are no longer married or living together.

You may qualify for equitable relief if you do not qualify for innocent spouse relief or separation of liability relief based on reported properly on a joint return that may be attributed to your spouse. You may also be eligible for equitable relief if the amount reported of your joint correctly is accurate, but the tax was not paid with the return.

Who Is Responsible for Tax Debt During a Divorce

Prior to a divorce, both parties share assets. Much in the same vein, they share liability for taxes if they file a joint return.

If you and your spouse are going through a divorce and file a joint return, you are both responsible for any outstanding balance due. In an instance where the IRS does not receive payment, it may go after you and your spouse. This is due to the fact that both of your names are on your joint return.

Why You Should Work with Your Spouse to Resolve Tax Liability

If you are dealing with a high net worth divorce or any other legal separation from your spouse, it is in both parties’ best interests to work together to resolve tax liability.

Tax liability does not go away on its own. By opening the lines of communication with a spouse, both parties can work together to address any outstanding tax debt. They may be able to come to terms with how they will file their taxes for a particular year and avoid any issues moving forward.

Along with this, you and your spouse may be able to figure out a way both parties can minimize their tax liability. This can help both you and your spouse cover your tax bills and get the best results out of your returns.

Get Ready to File Taxes When Going Through a Divorce

An accountant may help you complete your taxes as you move through the divorce process. They can explain tax laws and exemptions you may be able to get. Your accountant can address any tax concerns and questions you have.

In addition, it may be beneficial to partner with an attorney who specializes in divorce cases. To request a free case consultation with Ratzer | Dobis, contact us today.