In a recent post on his Forbes blog, a professionally licensed accountant outlined the three most difficult aspects of divorce and taxation, as well as tips for making those calculations as easy as possible. The number one best practice? Work with an experienced family lawyer, in conjunction with a tax professional, to develop an individualized tax strategy. The other tips included:
1) The Dependency Exemption: The age old question of, “Who gets to claim the kids?” When married filing jointly, both parents get the tax benefit of the dependency exemptions for the children. But after your separated or divorced, the situation gets a little more sticky. Reilly suggests that all separated or divorced parents use a Form 8332 to declare their intentions regarding the dependency exceptions for the kids. Reilly warns, “If the divorce agreement states that the non-custodial parent is entitled to the dependency exemption for one or more of the dependent children, either annually or every other year, I would not rely on the agreement itself as a substitute for the Form 8332 if the custodial parent refuses to sign it, regardless of how well written it may be.”
2) Alimony vs. Child Support: Under IRS regulations, PA alimony is considered income to the person receiving it and deductible by the person paying it; whereas child support is neither considered income to the payee nor is it deductible by the person paying it. But, of course, as with everything having to do with the IRS, determining what constitutes child support versus alimony can be foggy. Sloppy drafting in a Marriage Settlement Agreement or Court Order could lead to problems when tax time comes. Teaming up with a knowledgeable Pennsylvania Divorce Lawyer will give you piece of mind when April 15th rolls around!
3) To file jointly or not to file jointly, that is the question: How spouses who have separated decide to file their taxes depends on a number of factors, including the IRS regulations. Reilly encourages a case-by-case analysis of the situation to determine whether joint or separate returns would be most advantageous for the parties. He lists various situational elements that could impact the decision, such as excessive withholding by one spouse, or self-employment.
If you and your spouse are separated and you have questions about filing taxes this year, you should consider working with an experienced Pittsburgh divorce lawyer and a tax professional is a winning strategy. If you have any questions about a Pennsylvania divorce and its tax implications, don’t delay in contacting our Pittsburgh divorce lawyers today.