Divorce & Taxes

Taxes should be given a great deal of consideration during a divorce proceeding.  There have been several changes to the federal tax law that will substantially affect both parties to a divorce.

If there are un-filed tax returns and/or balances owed to the IRS or the Department of Revenue, these matters should also be addressed in the divorce proceeding especially if one or both of the parties are self-employed or are not working.  The parties to a divorce can come to an agreement regarding how un-filed tax returns and unpaid taxes will be handled.  Even in an amicable divorce, what is best for one party may not be what is best for the other party.  

Generally, while married, taxpayers may be eligible to file their income tax returns under the filing status of Married Filing Joint, Married Filing Separate or Head of Household.  Many married couples choose to file under one filing status or another because it is how they have always filed before or because it reduces the overall amount of tax.  However, deciding which filing status is truly best for you may not be as easy as it seems, especially in a divorce.  

Even if the parties to a divorce agree regarding how unpaid taxes will be addressed, the IRS and the Department of Revenue may not be required to honor those agreements.   

A taxpayer had many years of unfiled tax returns. Her and her husband had decided to file for divorce after many years. Her husband’s long-time accountant was suggesting that they file the unfiled tax returns jointly in order to reduce the overall tax rate. When a married couple file a tax return under the filing status of Married Filing Joint, they will both be responsible to pay any associated balances due even if they divorce or one of them passes away. Attorney Gregory Dzialo analyzed her situation and determined that it was not in her best interest to file under the filing status of Married Filing Joint.