In the divorce process, but haven’t filed your 2018 tax return? Your soon-to-be ex-spouse says the “best” way to file is Joint; but best for who? Are you being pressured to file jointly but negotiations are not being conducted in good faith?
When you file and how you file can many times become a defining moment in the divorce process.
Tax Filing Options
Your income tax filing status is determined by your legal marital status (according to state law) at the end of the year –
- If you were still married at December 31st, you can file Jointly, Head of Household (HH), if eligible, or Married Filing Separate (MFS)
- If you were divorced (final decree) or had a decree of Limited Divorce by December 31st, you can file Single or Head of Household (if eligible)
The Head of Household filing status will, under most circumstances, produce the lowest tax bill (compared to Single or MFS). Depending upon how many overnights a child spent with a parent (physical custody), a per child tax credit of $2,000 may be also be available if a spouse files Head of Household vs. Married Filing Joint.
When Should You File?
Although there is no longer a tax exemption for a dependent child, the parent with whom the child spent the most overnights with is entitled to the child tax credit (above). In a highly-contested divorce, where there is little trust and no agreement on who is claiming a child as a dependent, it is critical that the true custodial parent file the return prior to the other parent filing. The IRS will recognize the parent who files first as the legitimate custodial parent.
Divorce Settlement Strategy
At the beginning of this blog, we mentioned negotiations not being in good faith. Leverage can be quickly obtained by the wronged spouse if he or she (being the true tax-custodial parent) files as Head of Household (first to file) thereby making the non-custodial parent file as Married Filing Separate (costing him or her $1,000’s in taxes).
Although this strategy could cause more angst and conflict when done, the HH return can always be amended (up to 3 years post original filing date) with the spouses or ex-spouses being able to file jointly for the year prior to divorce.