Till Death Do Us Part?: Divorce, Separation, and Taxes

Going through a divorce or even being separated from your spouse is never an easy process to go through. Unfortunately, your marital status is not the only area that is affected during the ordeal. A separation or divorce can directly affect your taxes in a “not so positive” way.  

Taxpayers who are in the process of divorce or have recently divorced should consider the impact that it will have when filing their annual taxes. Here are a few tips and highlighted areas that you want to look out for before tax season comes around: 

Alimony payments that are paid under a divorce or separation are deductible by the payer. The recipient of these funds, however, must report these payments and include it in their income. 

An IRS Form 1040 must be filed with the following information included: 1) Amount of alimony paid 2) Former spouse’s Social Security number or Individual Taxpayer Identification Number. 

For those receiving alimony payments, it should be reported as income on Form 1040 in the year that it was received. Since alimony is not subject to tax withholding, it may be necessary to increase the tax paid during the year to avoid a penalty. This can be done through estimated tax payments or by increasing the amount of tax withheld from wages. 

Be sure to update handle any name or address changes with all necessary parties as much in advance to tax filing season as possible to avoid any filing errors or issues with the IRS. Individual retirement account deductions should also be reviewed as well. 

A name mismatch during tax return processing may delay a refund. Notify the Social Security Administration (www.ssa.gov) of any name changes after a divorce. 

Child support payments made by either party are NOT deductible or taxable income. 

In order for a former spouse to not be able to deduct contributions that were made to their former spouse’s traditional IRA, a final decree of divorce or separate maintenance agreement must be filed by the end of the tax year in which they are filing. Only contributions to their own traditional IRA can be deducted. 

Do you know someone that is going through a divorce or separation and could utilize this helpful information? Share this post with them! And let them know that if they need extra time to file, for whatever the reason may be, ExpressExtension is here to assist with any tax extensions that they may need. Whether it is personal, business or for an organization, we provide you with extra time to file your taxes correctly to stay in good standing with the IRS. Be sure to visit our website at www.expressextension.com to find out more about how great of a resource we are!