Going through a divorce can be an emotional roller coaster leaving profound lasting effects on not only your relationship with your soon to be ex, but the surrounding people close to you. It’s a battle of who gets what and how much of it. There’s a third party, however, that might be the most difficult one to deal with, and that is Uncle Sam and his various tax repercussions that arise.
While married, a couple can file a joint tax return which in most cases results to lower taxes. With joint tax returns, instead of only being able to claim one exemption, you can claim one for yourself and one for your spouse. Usually, the only risk involved in filing joint tax returns is that any mistakes made by either spouse, both will be held responsible for. However, once the two of you decide to take separate paths, you no longer qualify for these joint tax returns and are now back to being single in the eyes of the IRS.
The effects of divorce on taxes do not end there. While married, you equally claim your children as dependents in order to receive tax exemptions, but when the two of you split-up, only one of the you is allowed to claim the children. The IRS says that the claiming parent must provide more than half of that person’s support in a calendar year, but if the divorcees can agree on alternative terms, the IRS will allow that as well.
The most notorious financial burden of divorce is alimony and child support. According to tax law, alimony is equated to receiving a monthly income by the receiving party, and is thus susceptible to being taxed. While the recipient pays a tax fee, the one paying gets a tax deduction whose amount depends on how much alimony they are paying. Child support, on the other hand, is completely tax-free for both parties and of no interest to Uncle Sam.
Going through a divorce is just as much a legal battle and it is an emotional one. While sometimes you cannot control your emotions, you can control how you handle the financial obstacles and IRS tricks. Finding the right attorney who can make sure that you are not just throwing money away can prove to be well worth the cost. Although you might be single in your love life, you should not be single in your legal one. Get in touch with the San Diego divorce lawyers at Yelman & Associates to find a partner in your battle with Uncle Sam and the IRS.