Many people wonder how they should file their tax return after divorce and what will change on it.
Here’s a list of things to consider and plan for:
2 different issues to determine for tax purposes:
- Filing Status – HOH or Single (determined on last day of calendar year — 12/31)
- Dependency exemption for each child
“Custodial” and “noncustodial” parent — definitions are different for IRS than for “custody” per the divorce decree:
- The “custodial” parent is the one whom the child resides with for more than ½ of the year – and this can change from year to year
- To qualify for HOH status – you must have at least 1 person who lives with you for more than ½ of the year (whether or not you deduct them as a dependent)
- If the child lives with each parent equally – per the tiebreaker rules – then the parent with the highest AGI is the “custodial” parent – and this can change from year to year
Dependent Exemption:
- IRS doesn’t usually get involved as to which parent claims the child as a “dependent” – just as long as the same child is not claimed by both parents
- If the “custodial” parent agrees to give (or revoke) the dependency exemption to/from the “noncustodial” parent – he/she must execute Form 8332 and both should attach it to their tax return (for each applicable year)
Tax Credits for children:
- Child Tax Credit (currently up to $2,000 per child under 17) – goes with the parent claiming the dependency exemption
- Child Care Expenses/Credit (form 2441) – (for children under 13 — or older & disabled) – stays with “custodial” parent
- Earned Income Tax Credit (EITC) – goes with the parent claiming the dependency exemption
Things to do Post-Divorce:
- Complete a new form W-4 with your employer to make sure you are having enough tax withheld
- The IRS has 2 “tools” on their website to help with this – “Tax Withholding Estimator” and “Paycheck Checkup”
- Review your Beneficiaries on all bank & investment accounts, retirement accounts, insurance policies, etc.
- If your name changed (example: you restored your maiden name) – make sure to contact Social Security and apply for a new SS card (Form SS-5)
These tax issues can be very confusing – and you should always consult with a qualified Tax Professional & your Divorce Attorney regarding the above items. But whatever you do – don’t call the police on your Ex-spouse for a “tax emergency” – like this woman did – because they won’t be able to help you!