Tax Refund Issues and Divorce in NC
Divorce can be emotionally draining, financially stressful, wreak havoc on your life and tax refund issues and divorce in NC can add even more stress. On top of that, it can have serious tax consequences. Many factors must be addressed in the effort to minimize your financial losses.
At Charles R. Ullman & Associates, we focus our practice exclusively on family law matters. Our founding attorney, Charles Ullman, is certified as a Family Law Specialist by the North Carolina State Bar. We know your rights and protections under North Carolina law, and we will work hard to obtain the best possible results and assist our clients in every aspect of divorce.
Filing Taxes During Divorce
If you are in the process of divorcing but still married as of December 31, you may not file with single status, as covered in IRS Publication 504. Your filing options are Married Filing Jointly, Married Filing Separately, or Head of Household, under certain circumstances, if you lived separately from your spouse for at least 6 months of the year. You may be in a better tax position if you and your spouse agree to file jointly.
Keep the following in mind if you are filing taxes during your divorce:
- Gather information early. Depending on the situation, you may need to obtain the necessary records through discovery or with the help of the court, and that can be a time-consuming process.
- If you file a joint return with your spouse, examine it carefully before you sign. You may be equally liable with your spouse for any inaccuracies.
- You may only file jointly if your spouse agrees to it.
- Child support is neither taxable for the payee nor deductible for the payor.
- Spousal support is taxable for the person receiving it and deductible for the one paying it, unless specified in a court order or written agreement, which may be beneficial under certain circumstances.
- Cash payment of certain items, such as mortgage, rent, tuition, and medical expenses, may be considered spousal support only if specified by court order or settlement agreement.
- You must have physical custody of a child in order to claim head of household status. When couples split time-sharing equally, neither parent can claim head of household.
- Tax benefits for parents such as earned income credits, child tax credits, and head of household filing status are critical factors to consider in child custody, support, and visitation agreements.
Tax Refund During Divorce
If you are still legally married on the last day of the year and file taxes jointly with your spouse, any refund you receive will be in both spouse’s names, and you will need to divide it equally. The same is true of any tax liability. Each spouse has an equal share, regardless of who earned the greatest income.
Splitting a Tax Refund After Divorce
For divorcing couples who file jointly in the last calendar year of their marriage, a refund may be due after the divorce is finalized. Beware if your spouse owes back child support, federal or state taxes, or student loans. The refund can be intercepted to cover the arrears.
However, the IRS will refund your share if you are an “injured spouse.” If you made estimated tax payments or had income tax withheld from your wages, or claimed a refundable tax credit, and if you are not legally obligated to pay the past due amount, you can qualify as an injured spouse.
Guidance on Your Tax Refund and Divorce
The family law attorneys at Charles R. Ullman & Associates can help you be sure you get the full amount you deserve of a tax return that comes after your divorce. To discuss your tax issues related to your divorce, contact us today.
Last updated: April 14, 2015