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Five things to know about divorce and taxes

| Jan 2, 2020 | Divorce |

One of the things parties may fail to consider when going through a divorce are tax ramifications. Once a divorce is finalized, the next tax filing period will look a lot different.

First, you must remember to change your withholdings with your employer. You will now claim single rather than married. If children are involved, your dependents may also need to be changed depending on your custody agreement. This is a very important step, as it will have great impact on what you owe or how much your refund is.

Second, be sure that your custody agreement specifically states which parent will claim the children on taxes, and what years. For example, one spouse may claim them as dependents in every even numbered year, while the other claims odd. This is also especially important. Many spouses fail to include this stipulation in the agreement, and it almost always becomes an issue at tax time.

Third, if you receive alimony, understand that the IRS may not consider it to be exempt from withholding. That determination will be made according to how long the alimony payments are ordered for. An accountant can help you answer this question. Fourth, even if your divorce was not finalized until 11:59 p.m. on the very last day of the year, you may claim Head of Household. This will yield a larger standard deduction under new tax laws, and likely increase any refund due.

Finally, if there is any concern at all regarding how a divorce is going to affect tax filing status, it can help to consult with an attorney experienced with the many elements of the legal divorce process. Tax matters are too complex and can carry far too many potential negative implications if not handled properly, so working with an experienced professional can help ensure peace of mind.