When tax returns become due while going through a divorce, people often question whether they can or should file jointly with their spouse. Here are the answers to the most frequently asked questions:
Who can file a joint return?
Spouses who are legally married may file a joint return. A “married” status is defined by the United States Internal Revenue Code (IRC) as two individuals lawfully married to each other. They must be married at the close of the tax year, December 31. Treas. Reg § 301.7701-1.8 An individual legally separated from his spouse under a decree of divorce or separate maintenance is not considered married for income tax purposes, IRC §6013(d)(2) and must file separately.
It is usually financially advantageous to file a joint return as it results in less tax than if spouses file “married filing separately”. The disadvantage is that if a joint return is filed both spouses are jointly and severally liable for the tax shown on the return and any subsequent adjustments, IRC §6013(d)(3), Treas. Reg. §1.6013-4(b). Even though a State court judge court may order one spouse to pay the tax debt in the divorce action, the IRS can and will try and collect the tax debt from either spouse because the IRS is not a party to the divorce action.
Can you change your mind?
If separate returns are filed, the rules for “married filing separately” must be followed. The taxpayers under this scenario generally have up to three years after the return due date to amend those returns and file a joint return. If a joint return is filed and the couple then decides they want to file separately, they may only do so up to the due date for the return with extensions.
If you file separate returns who gets to claim which deductions?
If separate returns are filed in non-community property states, which includes Oklahoma, each spouse reports their individual income and deductions. For example, if one spouse paid the property taxes from his checking account, then he gets the deduction. If the deduction was paid from a joint checking account, then each spouse gets half. If one spouse itemizes, the other spouse must also itemize. Neither the same child nor the same deductions can be claimed by both spouses in the same year. Who claims minor children is a more complex issue. This is usually determined based on custody and support. It is recommended that there is an agreement incorporated into the divorce decree as to deductions and dependents to avoid any issues with both spouses claiming the same item. “Married filing separately” taxpayers do not usually qualify for other benefits, such as the Child Care Credit or the Earned Income Credit.
Should you file a joint return during a divorce?
If you file jointly and the other spouse does not pay what they were supposed to, you may end up paying the IRS and taking your spouse to court. If there is a history of tax issues and tax liens, then there is likely to be a problem. If one or both spouses are W-2 taxpayers who always get a refund or only owe a few dollars, then there is usually minimal risk. If you discover that your spouse should have but did not file returns during your marriage, then filing jointly is not recommended. This is a question that should be considered on an individual, case-by-case basis.
Tax-related matters are often complicated – especially during the divorce process. If you need trustworthy legal counsel working in your or your client’s best interest, our tax attorneys at Doerner, Saunders, Daniel and Anderson can assist you. Contact us in Tulsa at 918-582-1211 or in Oklahoma City at 405-319-3500.
Doerner, Saunders, Daniel & Anderson, LLP provides this content for informational purposes only. It is not intended to provide legal or other professional advice nor does the transmission of this information create an attorney-client relationship between any attorney of the Firm and the reader. If you seek legal advice or assistance, please consult with a competent attorney familiar with the applicable laws. If you wish to initiate possible representation by an attorney with this Firm, please call the attorney of your choice. You will be advised of our processes to avoid conflicts of interest and requirements of our letter of engagement prior to the commencement of representation.
