Should You File Taxes Jointly or Separately During Divorce?

 Posted on December 04, 2024 in Divorce

Filing taxes is a complex process that can become even more complicated during a divorce. Deciding whether to file jointly or separately is a critical factor that can have a significant impact on your finances. To make an informed decision, it is important to understand how IRS rules and state laws affect your tax filing status. An experienced Kane County, IL divorce attorney can provide guidance throughout this process to help ensure your financial and legal interests are protected.

What Does It Mean to File Taxes Jointly or Separately?

When you jointly file taxes, both spouses combine their income, deductions, and credits into a single tax return. This option is available if you are still legally married as of December 31 of the tax year.

Filing separately requires each spouse to file their own tax return. They must report their individual income and only claim the deductions and credits they are qualified to receive. You can choose this option if you are legally separated or prefer not to file jointly.

What Are the Benefits of Filing Jointly?

There are several advantages to filing jointly, especially if you and your spouse remain on good terms during your divorce:

• Lower Tax Rates: Joint filers may benefit from lower tax brackets, which reduces their overall tax burden.

• Eligibility for Credits: Filing jointly allows access to certain tax credits, like the Earned Income Tax Credit and the Child Tax Credit, which may not be available if filing separately.

• Simplified Paperwork: A single return can be more straightforward to prepare and file than two separate returns.

What Are the Risks of Filing Jointly During a Divorce?

While the potential tax savings can be tempting, there is an increased liability risk. Potential risks include:

• Joint Liability: Both spouses are jointly and individually responsible for any tax debt, penalties, or interest. If one spouse does not report income or improperly claims deductions, the IRS can hold both accountable.

• Conflict Over Refunds or Payments: Dividing a tax refund or agreeing on how to handle a tax bill can lead to disputes.

• Trust Issues: If you suspect your spouse may be dishonest in their financial reporting, filing jointly may not be advisable.

When Does Filing Separately Make Sense?

Filing separately directly addresses risks associated with filing jointly. Some situations where filing separately may be the better option include:

• Limiting Liability: When filing separately, you are only responsible for your own taxes.

• Protecting Specific Credits or Deductions: Filing separately can help you claim deductions, like medical expenses, that are based on a percentage of your income.

• Formalizing Separation: If you are legally separated under Illinois law as of December 31, the IRS considers you unmarried for tax purposes, so you must file separately or as head of household.

Contact a Kane County Divorce Attorney for Tax Guidance

Filing taxes during a divorce requires careful planning. To ensure you are making the right decisions, contact a St. Charles, IL divorce lawyer at Goostree Law Group. Call 630-584-4800 today to schedule a free consultation.