When you are getting divorced, it is important to pay attention to income tax returns. Often, it makes sense financially for a divorcing couple to file a joint income tax return for the preceding year. Before you sign a joint return, you need to verify that your spouse has accurately reported his or her income. If you sign a joint return and the IRS determines that because of something your spouse did, your tax should have been higher, you could be liable for payment of the additional tax.
You also need to pay attention to which spouse gets to claim the income tax dependency exemption for any minor children. The default position of the Internal Revenue Service is that the parent who has the children in his or her care the majority of the time (i.e., 6 months plus one day) is the person who is entitled to claim the exemptions.
However, in Minnesota, divorce courts can modify this, and they can award the income tax dependency exemptions to one parent or the other, depending upon the facts of the case. Generally, the exemptions are allocated equally. If there is only one child, then the right to claim the exemption is alternated between the parents on an annual basis.
If you have questions about this or any other divorce issue, call Minnetonka, MN, divorce attorney Daniel Fiskum at (952) 270-7700 to schedule a free divorce case analysis.
Around this time of year we at Fiskum Law are often asked about whether a divorcing spouse should file a joint tax return with the other spouse. Our answer is “it depends.”
When you sign a joint tax return with a spouse, you become jointly and severally liable for the tax debt owed. This means that if there is money that is owed and your spouse does not pay it, the IRS will make you pay it.
What if your spouse misrepresents his or her income? What if he or she failed to report some income, and when the income is reported later, it results in a significant tax debt?
If that happens, the IRS can make you pay the debt. If you sign a joint tax return for 2012, you become responsible for any and all taxes and penalties owed in connection with any amended 2012 tax returns.
Can the divorce court enter an order directing your spouse to pay the debt? Yes, it can, but if your spouse doesn’t have any money and you do, the IRS will take it from you.
So, you need to be careful before you sign a joint return. There are benefits, including a lower tax rate, but you need to make sure that there has been full and honest disclosure of all income and debts so that you know what you are committing to. I have developed language that I use in proposed Judgment and Decrees that, to the greatest extent possible, protects a spouse in this circumstance.
Feel free to call me, attorney Dan Fiskum, at (952) 270-7700 to schedule an in-person divorce case analysis. My office is conveniently located in the Carlson Towers at the intersection of Highway 494 and Highway 394 in Minnetonka, Minnesota.