There are many things that can create big changes on your annual tax filing. Divorce is one of them.
Not only can marriage and divorce affect your taxes, but changes in the laws as they relate to divorce can also create issues as well.
Alimony and child support, as you expect, can affect your filings. Alimony payments can be deducted by the payer, even if you don’t itemize each year. This will still allow for a reduced taxable income. For those who receive alimony payments, they must include this as their own taxable income. Keep in mind that there have been changes in spousal support taxes as part of the Tax Cuts and Job Act in 2017, so you’ll need to pay close attention to those changes and how they affect your taxes each year. One of the biggest tax changes after 2018 is that alimony will no longer be deductible or taxable to the payer or the one who receives alimony payments.
Child support is part of the process for a majority of divorces. It has not been deductible or taxable for quite some time, and it remains true today. In other words, there’s no law that requires you to report it on tax returns. Be sure you and your former spouse are on the same page in terms of who claims your children on annual tax filings. This could create problems if you both claim the same dependents.
Did you know that changing your name could create a delay in your tax returns? Part of this delay could be a result of delays at the Social Security Administration, which is where you officially change your name. Either way, it can delay refunds. Another way to delay your refund is changing your marital status. Again, it goes back to ensuring the changes are recorded at the Social Security Administration.
The new tax laws have meant other big changes in marital and divorce relations.
Let’s say you remarried in 2017 and learned later your spouse has a significant amount of past due child support that’s owed to their children. The IRS might divert this refund to his or her children to pay down the past due amount. That doesn’t mean it has to affect you, however. You can file for injured spouse relief. This means the IRS will allow you to receive your portion of the refund based on your tax returns, while the remaining amount goes towards back child support.
In the past, equitable relief allowed for someone to delay their filing up to two years if they were unable to file on time due to what the IRS calls “difficult or intimidating situations.” An example might be domestic abuse. That two-year limitation has been lifted.
Finally, if you think you were owed more after your marriage or your divorce because you were unaware of what was being filed, you can now go back several years and have the numbers recalculated. It’s called Innocent Spouse Relief. Innocent spouse relief, separation of liability and equitable relief, outlined above, are the three ways in which this change can be used. You’ll want to discuss these possibilities with your divorce attorney.
For more information, speak to our divorce lawyers now.