There are a lot of tough decisions to make in situation when your marriage is failing including if/when to separate, if/when to file for divorce, how to handle child support and alimony, child living arrangements, and the division of property. A very important decision that is often overlooked at this time (i.e. before a divorce is final) is whether to file a joint income tax return or not? This is an important decision with many tax and financial implications and should not be taken lightly. Ideally, a professional accountant should be consulted. In this post I will briefly summarize the filing status options and implications and cover the subject in more detail later. Tax law provides that Marital status is determined as of the last day of the tax year (i.e. 12/31). If you are divorced as of 12/31, your filing status options are 1) Single or 2) head of household (if you meet certain requirements). If you are still married as of 12/31, your filing status options are 1) Married filing joint, 2) married filing separate or 3) head of household (only in certain limited circumstances).
One thing to remember during the divorce process is that tax preparation is generally significantly more complicated (and yes more costly) than normal. If you are still married as of year-end it is generally easier and more cost effective to file a joint return. The primary reasons to consider not filing a joint return are fear of being held jointly and severally liable for income (reported and unreported) and excess deductions of the other spouse and because the spouses may want to know exactly what the tax on their portion of the income is. The total tax is generally (but not always) approximately the same whether the couple files jointly or not. Preparing separate returns each with the proper share of income and deduction is generally significantly more costly. If you do decide to file a separate return, and if you expect to be divorced by year-end and must file a separate return, you must begin early in the year to take steps to ensure that you have the proper amount of income taxes paid in throughout the year either via withholdings or estimated tax payments to avoid being penalized for the underpayment of estimated tax.
After the divorce is final, the couple must file separate returns (single or head of household) and, while sorting out property divisions and alimony and child support, these returns will also be more difficult and costly to prepare. However, it will get easier over time and the key is to utilized the services of a competent professional and keep moving forward.