With the April 15th tax deadline just behind us, there is no better time than the present to beging preparing for your 2015 tax filings. Preparing your returns is never easy and if you are recently divorced, there are new issues to be considered and accounted for. The purpose of this post is not to give tax planning advice. Please rely on your accountant or tax preparer for guidance. I just want to idnetify a few areas that require special attention due to a divorce.
Alimony: Remember, alimony, if in a court order, is tax deductible by the payor and is to be included in the taxable income of the recipient. However, child support has no tax consequences. If you are the payor, you will need to identify the reicipient on your return and as the recipient, you identify (by their SSN) who you are receiving the alimoy from. I have to believe that this simple cross cehcking exercise is routinley performed by the IRS. If you are receiving alimony, it is critical that you develop a plan that prepares you to pay the tax that will be due on your alimony as there are no withholdings made from your payments.
On a related note, I am often asked if the legal fees incurred in connection with the divorce are tax deductible. The best answer I can offer is “maybe”. Under the IRS guidelines it may be possible. But again, please consult with a tax professional on this point. I will assist your preparer in any way necessary, but I do not offer any opinions as to whether or not your fees are tax deductible.
WITHHOLDINGS: Once your divorceis finalized, review the withholdings with your employer’s HR department. You will need to make some adjustments to these going forward.
CLAIMING THE CHILDREN: Post-divorce, you cannot both claim the children as exemptions each year. Don’t get yourslef in trouble by making this mistake or thinking the IRS won’t notice. Rely on the langauge in your settlment agreement. In the agreements I draft for clients, I include specific language on this issue. Parties can alternate making the claim on an annual basis or allow one party to claim the child(ren) each year. Whatever arrnagemnts you make, adhere to them.
These are just a few of the tax related issues that arise during and after a divorce. Your attorney should be able to identify these issues and in working with your tax professional you can put the proper tax strategy in place that complies with the terms of your agreeemnt and the tax code.
