Filing Taxes in Arizona During a Divorce

Filing Taxes During A Divorce

If you are in the process of getting divorced in Arizona, taxes might be one of the last things on your mind. However, it is important for you to understand how to handle your income tax return when you are divorcing and what to do with any refund you might receive.

Just like a divorce attorney, Stephanie Villalobos, a licensed legal paraprofessional at De Novo Law, can help you to negotiate the various aspects of your divorce, including your taxes during a divorce.

Can You File a Joint Income Tax Return During a Divorce?

If you have a pending divorce case, you and your estranged spouse can file a joint income tax return for this tax year as long as you remain married on Dec. 31 and agree to file jointly. Similarly, if you were still married as of Dec. 31 of last year and agree to file jointly, you can file a joint income tax return for that year. 

There are some benefits to filing a joint income tax return during a divorce

There are some benefits to filing a joint income tax return. You and your spouse will be entitled to a larger exemption and more credits than if you file as married filing separately or as a single taxpayer. If you are separated at the end of the tax year but are still married, you can file jointly. If your divorce is finalized before the end of the year, you and your spouse will have to file separately next year.

Legal Separation Vs. Divorce When Filing Tax Returns

People who are legally separated have not received a final divorce decree and are considered to be married by the Internal Revenue Service (IRS). Your spousal support, child support, custody, and property division orders will not affect your ability to file a joint tax return. If you receive a decree of separate maintenance before the end of the year, you can choose to file as head of household or as single, but it still might be a good idea to file a joint income tax return with your spouse. Filing separate returns will likely mean that you will pay higher taxes. 

Pros and Cons of Filing Jointly

There are several advantages and disadvantages of filing a joint income tax return with your estranged spouse. While most people pay lower taxes during a divorce when they file jointly, some might benefit more by filing separately. 

One disadvantage of choosing to file jointly is that both of you will be responsible for paying any taxes you might owe.

One disadvantage of choosing to file jointly is that both of you will be responsible for paying any taxes you might owe. If your estranged spouse refuses to pay his or her share, the IRS will still try to collect what is owed from you. Your legal paraprofessional at De Novo Law can help to negotiate an agreement with your spouse to indemnify you for any tax liability attributable to him or her. You can also seek tax relief through the IRS, including separation of liability, innocent spouse relief, or equitable relief. 

Another potential issue with filing a joint income tax return might include when one spouse receives the refund and refuses to give the other spouse his or her share of it. De Novo Law can help you if this happens by asking the court to order your spouse to pay you your share. However, it is better to take proactive steps to prevent this from occurring. Include a provision about how you will handle tax liabilities and refunds in your property division agreement. If you will receive your refund by check, make sure that it is written to both of you. If the refund will be directly deposited, either write an agreement through which your spouse agrees to pay you your share or have it deposited into a joint checking account. 

…when one spouse receives the refund and refuses to give the other spouse his or her share of it. De Novo Law can help you

If you are unsure about whether your spouse can accurately prepare your joint tax return, don’t allow him or her to do so. Instead, talk to him or her about hiring a tax professional to prepare your return. If he or she will not agree, file separately.

Other Tax Filing Statuses

If you do not agree to file your taxes jointly, you will have to file your return with a status of single, head of household, or married filing separately. If you are eligible to file as head of household, that status will allow you to claim a higher standard of deduction and credits, including the child tax credit, dependent care credit, and earned income credit. The eligibility criteria for filing as head of household include the following:

• You paid more than half of all of your living expenses, including rent, food, insurance, utilities, and taxes during the year.
• Your estranged spouse did not live with you during the last six months of the tax year.
• Your child lived with you for more than half of the year.
• You must be eligible to claim your child as a dependent on your tax return.

If you file as head of household, your estranged spouse will have to choose the married filing separately status. 

The married filing separately status normally results in both of you paying higher taxes. This status also prevents you from claiming certain deductions for which you might otherwise qualify. 

Relief From the IRS When Your Former Spouse Fails to Pay Tax Liabilities

If you file a joint return while your divorce is pending with your estranged spouse, both of you will be responsible for paying any tax liabilities from the return. If your former spouse fails to pay his or her tax liabilities from your joint return, there are a few types of relief you can apply for through the IRS. If you had a written agreement with your ex-spouse that he or she would indemnify you for any tax liabilities, Stephanie Villalobos, LP can file a motion with the court to secure an order for your ex-spouse to pay you. In the meantime, however, the IRS will still expect you to pay while you wait for the court order.

If you file a joint return while your divorce is pending with your estranged spouse, both of you will be responsible for paying any tax liabilities

Innocent spouse relief is a type of relief the IRS might grant when the tax liabilities from your joint return were caused by omissions or errors your ex-spouse made on the joint return.

Innocent spouse relief is a type of relief the IRS might grant when the tax liabilities from your joint return were caused by omissions or errors your ex-spouse made on the joint return. You can also petition the IRS for separation of liability. This type of relief might be granted if your former spouse failed to report all of his or her income. If you are granted this relief, the IRS will calculate the percentage of the liability each of you is responsible for paying, and you will only have to pay your percentage. If you do not qualify for either of these two types of relief, you can ask the IRS to grant you an equitable relief.