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Understanding Post-Divorce Joint Taxes
In the midst of navigating emotionally charged issues during a divorce, financial aspects often take a supporting role. Nevertheless, understanding one’s tax obligations post-divorce is crucial to maintaining fiscal health and ensuring legal compliance. Numerous questions arise such as who will claim the children as dependents, how alimony and child support payments will affect your tax situation, and how the division of property will be handled. One aspect garnering particular attention involves the subject of post-divorce joint taxes.
The Nature of Post-Divorce Joint Taxes
One of the significant pitfalls for divorcing couples is the decision to file joint tax returns. Filing jointly during or after divorce proceedings may seem like a practical choice — it usually leads to a lower tax bill compared to filing separately. However, it’s essential to understand that, in the eyes of the IRS, both spouses are jointly and severally liable for the tax and any additions to tax, interest, or penalties that arise from the joint return, even if they later divorce.
Post-Divorce Joint Tax Liability
Post-divorce joint tax liability is a shared responsibility for paying taxes after divorce, including tax deficiency, penalties, and interest. This IRS policy remains applicable even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns.
This aspect of tax law means that if your ex-spouse has not paid a part of prior tax debts or if there’s an audit and extra tax is owed, you could be held accountable for these debts. This is still applicable regardless of whether you earned all the income or not. This stipulation puts divorcees who jointly file in a precarious position and underlines the significance of approaching this area with the right information and protocol.
Understanding Innocent Spouse Relief
The IRS offers something called Innocent Spouse Relief which provides you relief from additional tax you owe if your spouse or former spouse failed to report income, reported income improperly or claimed improper deductions or credits.
In order to qualify, you have to meet the following criteria:
- Filed a joint tax return with a substantial misstatement, due to your spouse.
- At the time of signing, you didn’t know, or have a reason to know, that there was an understatement of tax.
- Considering all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax.
Understanding the nuances of such regulations can greatly affect your financial future, especially if your former spouse has not adhered to tax laws.
Preparing for Post-Divorce Joint Taxes
If you decide, with full awareness of the possible implications, that joint filing is still the best option for you after your divorce, take steps to protect yourself.
- Formally separate your tax business from your ex’s by getting a professional involved.
- Ensure you have thorough documentation of all financial transactions, assets, and debts.
- Ensure a clean break financially by separating all joint accounts and refinancing any joint debt.
Each of these stages may involve technical details and legal implications, signifying the importance of professional assistance during every step.
Seeking Professional Help with Post-Divorce Joint Taxes
Consulting with a tax relief company like Brightside Tax Relief can help unravel the complex labyrinth of post-divorce joint taxes. The company’s professional tax advisors have helped scores of taxpayers to navigate the intricate tax-related issues that surface during and after divorce.
Brightside’s team of proficient tax experts can assess your situation, review your past tax returns for errors, advise on income changes and other life transitions, and also help plan the timing of your divorce to save taxes.
The Bottom Line
Facing the landscape of taxes post-divorce can be daunting and complicated. But it is crucial to your financial well-being and peace of mind. Understanding post-divorce joint taxes is a solid step in setting foot in the financial future post-divorce.
For tailored advice to suit your circumstances, we recommend consulting a tax relief company such as Brightside. Ensuring your actions are informed and in compliance with tax laws shields you from inadvertent consequences and enables you to move forward with certainty and empowerment.
For more information on joint taxes and divorce, the IRS provides a comprehensive guide which can be accessed HERE.
