The legal separation or divorce of a person results in a change in their relationship status, which has an impact on their tax situation. Until they receive a definitive divorce decision or a court order for separate support, the IRS treats the pair as married for tax filing reasons.

Update Withholding

A new Form W-4 must often be submitted to the employer after a divorce or a separation in order to claim the correct withholding. They can be required to pay anticipated tax payments if they get alimony. People can determine if they are withholding the appropriate amount using the Tax Withholding Estimator tool on IRS.gov.

Understand the tax Treatment of alimony and separate maintenance

For taxation reasons, alimony or separate maintenance payments may be made to a spouse or former spouse through a divorce order, a separate maintenance decree, or a signed separation agreement. The paying spouse may deduct certain alimony or separate maintenance payments, while the receiving spouse is required to include them in income.

However, individuals can’t deduct alimony or separate maintenance payments made under a divorce or separation agreement executed after 2018 or executed before 2019 but later modified if the modification expressly states the repeal of the deduction for alimony payments applies to the modification. Under such a contract, alimony and separate maintenance payments are not counted as income for the recipient spouse.

Determine who will claim a dependent child if filing separate returns

In general, the parent who has custody of a kid is eligible to deduct the child from their income. If parents share custody equally but don’t file a joint tax return, they must decide who gets to claim the child. If the parents cannot agree, there are tie-breaking rules. Both the payer and the payee are not taxed on child support payments.

Consider filing status

Divorcing couples who are still married as of the end of the year are treated as married for the year and must determine their filing status. The What Is My Filing Status tool on IRS.gov can help people figure out what status makes sense for their situation.

Here the statuses separating or recently divorced people should consider:

• Married filing jointly. On a joint return, married people report their combined income and deduct their combined allowable expenses. For many couples, filing jointly results in a lower tax than filing separately.
• Married filing separately. If spouses file separate tax returns, they each report only their own income, deductions, and credits on their individual return. Each spouse is responsible only for the tax due on their own return. People should consider whether filing separately or jointly is better for them.
• Head of household. Some separated people may be eligible to file as head of household if all of these apply:
  • Their spouse didn’t live in their home for the last six months of the year.
  • They paid more than half the cost of keeping up their home for the year.
  • Their home was the main home of their dependent child for more than half the year.
• Single. Once the final decree of divorce or separate maintenance is issued, a taxpayer will file as single starting for the year it was issued, unless they are eligible to file as head of household or they remarry by the end of the year.

For more information on how Apex can help your specific situation, please contact our Tax Team or call our office at 630.584.4555.

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