Family Matters

Filing Joint or Separate Returns When Going Through a Divorce

Tax season is approaching quickly and couples who are going through a divorce need to determine how they are going to file.  Certainly, this is a topic that you should discuss with your attorney and your accountant.  Below are some factors that divorcing couples should consider when making this decision.

Couples going through a divorce have the option of filing tax returns jointly or separately.  If married couples file separately they must file “married filing separately.” In some instances one of the parties may file as “head of household.” If the couple is still married on December 31 they are eligible to file a joint return.  If they are divorced by midnight on December 31 then they must file separately from their former spouse.

Below are some pros and cons to consider when determining which way to file:

Filing Separately

Pros:    Allows financial flexibility, each spouse is responsible only for the tax due on his or her own return.

Cons:   Credits for dependents, deductions and exemptions have to be divided, thus deductions and tax benefits may only go to one of the spouses if you file separately.

Filing Jointly

Pros:    Lower tax rate, credit for dependents and deductions can be shared by both parties.

Cons:   When you file jointly, both parties are responsible for the full tax that it is owed. This means that the IRS will hold both parties responsible for all of the tax debt.  Both parties are liable for fraud found in the return.  However, if one of the spouses can prove “innocent spouse” then there may be an exception.  Examples of exceptions are unreported income and claiming improper deductions.

Pro or Con: Gain insight regarding the other person’s financial circumstances.

Keep in mind that parties can amend their separate returns to create a joint return. However, if you file jointly you cannot amend to file a separate return.

If you are going through a divorce you should weigh all of the factors, consult with trusted professionals and make a decision that best fits your situation.