Usually, filing a Joint Married return will result in the lowest taxes for both of you. However, this may not be the case, depending on various factors such as child exemptions, maintenance payments, child support payments, home deductions, etc. You should work with an accountant to make sure that you are filing the appropriate return for both of you, whether it be separate or joint returns.
If you are not able to come to an agreement on how to file your taxes for a year that you are going through a divorce process, for example, the Judge will make the decision based on what is in both of your best interests, not just one of you. If you do qualify to file a Joint Married return, and it is the best method for both of you, don’t feel that you are tied to your spouse in some unnatural way. It is simply a way to file your taxes in the most beneficial way. Some persons don’t even want to consider filing a joint return with their spouses during a divorce, and instead pay higher taxes to file separately.
You do qualify to file a Joint Married return if you are not yet divorced. If you are divorced on the last day of the year, you are effectively divorced for the entire year in which that divorce took place. If you are divorced on January 2 of a given year, you were married for the prior year so that you can file a Joint Married return for that prior year.
The exemption automatically goes to the custodial parent, unless the divorce or paternity court has ordered the non-custodial parent to have the exemption in certain years. Awarding the exemption to the non-custodial parent can be conditioned on whether, for example, the non-custodial parent is current in paying child support. The IRS defines the custodial parent as the one that the child spent the most time with during the year. You should include overnights and school time that the child attends while the child is with you, in order to determine who has the child most of the time during the year.
The amount of your legal and accounting fees that were paid and incurred to preserve or maintain income (not child support) may be tax deductible under certain circumstances. You need to check with your accountant to see if your legal and/or accounting fees qualify for a deduction.
Child support is never taxable to the person who receives it, nor is it deductible to the person who pays it. The only exception to this is Unallocated Maintenance which is a hybrid of child support and maintenance. Unallocated Maintenance may be paid to one person who pays the tax on the full amount of the child support and maintenance hybrid, and the other person (who is paying it) deducts the full amount from his/her tax gross.
Spousal support is taxable to the person receiving it, and is deductible from the tax gross of the person who is paying it.
Earned Income Credit
The earned income credit is a tax credit for some people who work and have earned income under a certain amount. To qualify for the Earned Income Tax Credit, you must have earned income from employment, self-employment, or another source and meet all of the following rules:
- Have a valid Social Security Number.
- Have earned income from employment, self-employment, or another source.
- Cannot use the married, filing separate filing status.
- Must be a U.S. citizen or resident alien all year or a nonresident alien married to a U.S. citizen or resident alien and choose to file a joint return and be treated as a resident alien.
- Cannot be the qualifying child of another person.
- Cannot file Form 2555 or 2555-EZ (related to foreign earned income).
- Your Adjusted Gross Income and earned income must meet the limits shown on the Income Limits, Maximum Credit Amounts and Tax Law Updates Page.
- Your investment income must meet or be less than the amount listed on the Income Limits, Maximum Credit Amounts and Tax Law Updates Page.
- If you are married and file a joint return with your spouse, your spouse must also meet the rules for everyone.
Child And Dependent Care Credit
If you paid someone to care for your dependent under age 13 or your disabled dependent or spouse so that you could work or look for work, you may be able to claim the Child and Dependent Care Credit on your tax return. The care must have been provided for one or more qualifying persons.
To qualify for the Child and Dependent Care Credit you must:
- Have paid for care expenses in order to earn taxable income. If you are married, both spouses must work either full or part time. Spouses who are full time students or incapacitated are excepted.
- Pay more than 50% of the household maintenance costs for a qualifying dependent.
- File your tax return jointly if married, unless the separation rules apply.
- Hire someone other than your child (under age 19 at the end of the tax year), your spouse, or a person you can claim as a dependent.
- Have qualifying expenses over and above any tax free reimbursements from your employer.
- Report on your tax return the name, address, and taxpayer identification number of the child care provider. If the care provider is a tax exempt organization, the taxpayer identification number is not required.
Child Tax Credit
If you have children who are under age 17 as of the end of the year, you can get a $1,000 tax credit per child on your tax return. A tax credit reduces your tax bill dollar for dollar. If you have three qualifying children, for example, you can cut your tax bill by $3,000. The credit does not affect the exemptions that you take for dependents. If your adjusted gross income is above a certain amount, the credit is limited.
Work Hand In Hand With An Attorney And An Accountant
Some people realize that they need to hire an accountant for the first time in their lives, if they are going through a divorce or other litigation. It is imperative that you gather all of the information that you can, in order to determine what exemptions and deductions that you are entitled to or not entitled to. If, for example, the use of exemptions for the children do not bring a tax benefit to one party, then the parties should negotiate so that the exemptions are treated properly in the settlement or litigation.
In order for a non-custodial parent to claim the child exemption:
If your divorce decree is dated January 1, 2009 or later, the Internal Revenue Service requires that you not only provide it with a copy of the pertinent pages of the divorce decree, but also with Form 8332 signed by your spouse, in order for you to claim the exemption. If your divorce decree is dated December 31, 2008 or before, and it gives you the exemption without any preconditions, then you can claim the child. You must file your return by mail and attach pertinent copies of your divorce decree, each and every year for which you are claiming the exemption.
The parties to a divorce had two children. The parties had an agreed order. The order gave the tax exemptions for both children to mom. She had those two exemptions for three years. 2012, 2013, [...]
The agreed order required husband to pay $4,000 per month to wife. Of the $4,000 sum, the parties agreed $2,000 would be maintenance and $2,000 would be child support. Wife filed a petition against husband. [...]