Ending a marriage is difficult enough. But if you’re recently separated or divorced, you have the added burden of figuring out a new and more complicated tax situation. In our founding partner’s most recent Huffington Post piece (see below for the link), Bari Weinberger gave us answers to the top four tax questions she gets asked by clients who are in the process of divorce. We’re following up with three more common mistakes divorced taxpayers make on their taxes and how to avoid them.
Mistake #1: The Name on Your Tax Form Doesn’t Match Your Social Security Card
If you changed your last name after your divorce, the IRS reminds you to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration. A mismatch between the name shown on your tax return and SSA records can cause problems in the processing of your return and could delay your refund. This is a very easy mistake to avoid: to change your name, simply file an application for a Social Security Card, at your local SSA office or by mail, and provide a recently issued document as proof of your legal name change.
Mistake #2: You File Head of Household Status Without Meeting HOH Tests
Filing as Head of Household offers certain tax advantages, but if you file the status erroneously, you may face the possibility of refund delays or future tax penalties. To qualify as HOH, you must considered “unmarried” by December 31 of the filing year and meet ALL of the following tests:
- You are filing a separate return.
- You paid more than half the cost of keeping up your home for the tax year.
- Your spouse did not live in your home during the last 6 months of the tax year.
- As outlined in your child custody agreement, your home was the main home of your child for more than half the year.
It should be noted that a taxpayer does not need to claim a dependency exemption to file HOH. This means that even in the years you, as the custodial parent “give” the dependency exemption to your ex-spouse (as stipulated in your divorce settlement), you can still file HOH.
Mistake #3: Not Taking Deductions for Divorce Tax Advice
Finally, payback for the all the trouble of figuring our your post-divorce taxes! Though the IRS generally does not allow taxpayers to deduct legal fees and court costs for getting a divorce, don’t forget that you may be able to deduct legal fees paid for tax advice in connection with a divorce and legal fees to get alimony, up to 2 percent. In addition, you may be able to deduct fees you pay to appraisers, actuaries, and accountants for services in determining your correct tax or in helping to get alimony.
The key to successfully taking this deduction? The IRS advises divorced taxpayers to obtain itemized lists of billable time with their divorce lawyers as a way to prove, if necessary, how much time and money was spent working on tax issues.
Tax season can bring many more questions and concerns than discussed here or on our Huffington Post article found here: Top 4 Tax Tips for Divorcing Couples or when tax laws change, as with the IRS’ amendments in July 2011: IRS Amends Tax Law to Help ‘Innocent Spouse’ Relief – So, before you make any mistakes, feel free to contact us in case we can help and make things easier for you at this time.