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Tips to a Successful Divorce and Tax Returns

Should we file joint or separate tax returns?There are pros and cons to filing a joint tax return which you should discuss with your tax advisor and your attorney. Generally, your tax burden will be lower although this will not always be the case depending on your respective incomes, deductions and credits.

The main disadvantage of filing jointly is that both of you are jointly and severally liable for taxes on the tax return, including any tax deficiencies, interest and penalties.

My spouse said they would sign a joint return but they are now refusing to do so?

Spouses often use tax returns as a bargaining tool. Generally, a joint return can only be filed where both parties agree and both sign the tax return. A court will not order unwilling spouses to file a joint return. 3. However, in rare circumstances the IRS will accept a joint return signed by only one spouse where there is evidence of a clear intent to file a joint return and the non-signing spouse does not file a separate return.

Effect of filing status upon child and spousal support

  • In calculating guideline child and spousal support, the Court has to take into account “the annual net disposable income of each parent” which is computed by deducting from annual gross income, state and federal income tax liability after considering the appropriate filing status, all available exclusions, deductions, and credits.
  • Therefore, your filing status as “Married filing jointly,” “Separate” or “Married filing separately” will have an impact on the amount of support you pay or receive. In one case, the California Court of Appeal overturned the trial court’s decision where guideline support had been incorrectly based on husband’s status as “Married filing jointly” instead of “Married filing separately.”
  • If the parties calculate guideline child and spousal support using a certified program such as “Dissomaster” and incorrectly input that the parties will be filing jointly when the Husband payor should have been filing as “Married filing separately” and the Wife as “Head of household,” the Husband may well end up paying less in child and spousal support because the program makes allowances for tax liability.

If we file a joint return what precautions should we take?

First, make sure that any tax returns are paid to both of you. If you decide to have any refund sent to you by check make sure that the check is paid to both of you jointly. If a direct deposit is sought make sure the refund is routed to a joint account. You should reach a clear agreement as to how tax liability will be apportioned.

A common approach is to prorate tax liability using a ratio based on both spouses separate incomes. Another approach could be based upon what each spouse would have paid if they had filed separate returns. Then to the extent a spouse’s share exceeds what he or she has already paid by way of salary or withholding or estimated tax, that spouse would pay the difference.

Lastly, if you are going to file taxes jointly, it’s a good idea to get your spouse to sign a Stipulation regarding Tax Indemnification since both spouses will be jointly and severally liable taxes on the tax returns, including any tax deficiencies, interest and penalties. Even if the divorce (dissolution decree) states that one spouse will be liable for any amounts due on previously filed joint returns, the IRS may still hold both spouses jointly and severally liable and go after either spouse.

Having the right team of advisors is critical to achieving your financial goals faster than you ever thought possible check with www.taxreturn247.com.au.

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