Tax Tips for Soon-to-Be Divorcees
BY CARRIE COLE
Preparing tax returns is stressful enough, but it can be more so during or after a divorce.
Tax returns are often the key to hidden assets, although they will not typically show money that is invested in life insurance policies, annuities and 401(k) plans (even previous employer plans where the money is left after terminating employment).
Another challenge of tax returns are filing status: married filing jointly; single; married filing single; head of household. If you have a child to claim, who receives the head of household status?
A couple’s marital status officially ends December 31. Is it wise to choose that date or postpone until January of the following year to take advantage of the “married filing joint” status?
Also, if there are not discussions about claiming children or certain deductions (if filing separately), oftentimes it’s a race to the IRS. The first one to file may end up with the deduction!
Claiming child exemptions is important and should be a topic that is included in negotiations. Parents will find it necessary to file IRS form 8332 “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent.”
Also, claiming strategies and/or receiving spousal support for children who are going off to college may affect financial aid eligibility.
Do you have a previous tax return to use as a guide? If not, you will have to contact your previous tax preparer or the IRS.
Do you feel that the tax preparer you used is a neutral party and can equally help both of you? If not, ask for a referral to someone new. Post-divorce, you will build new relationships, and that’s a good thing. Start fresh.
Do you know what information you need to prepare your tax return? Google is a great resource for tax preparation lists.
It’s ok not to have all the answers or the expertise you need. Reach out and ask for a referral to someone who can help you.
You might be surprised that with the right assistance, tax time may be easier than you thought!
Carrie Cole is a Certified Financial Planner, a Certified Divorce Planner and is a trained family law mediator. She has been specializing in working with divorced individuals since 1998. She has appeared in various publications, such as Kiplingers Personal Finance, the Detroit News, and the Wall Street Journal. Her website is www.smartdivorceplanning.com. She can be reached at firstname.lastname@example.org.
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