divorce-photo

If you are divorcing or recently divorced, taxes may be the last thing on your mind.  However, these events can have a big impact on your wallet.  Alimony and a name or address change are just a few items you may need to consider.  There are certain things to keep in mind.

Your filing status could change. Married Filing Separately or Married Filing Jointly are no longer an option, after your divorce. Depending on your previous filing status, your new filing status options could be Single or Head of Household.

Child-support payments are not deductible, and if you received child support, it is not taxable.  You can deduct alimony paid to for a spouse or former spouse under a divorce or separation decree, regardless of whether you itemize deductions. You must enter your spouse’s Social Security number or Individual Taxpayer Identification Number on your Form 1040 when you file.Voluntary payments made outside a divorce or separation decree are not deductible. If you get alimony from your spouse or former spouse, it is taxable in the year you get it.  Alimony is not subject to tax withholding, so you may need to increase the tax you pay during the year to avoid a penalty.  To do this, you can make estimated tax payments or increase the amount of tax withheld from your wages.

If you get a final decree of divorce or separate maintenance by the end of your tax year, you can’t deduct contributions you make to your former spouse’s traditional IRA.  You may be able to deduct contributions you make to your own traditional IRA.

If you change your name after your divorce, be sure to notify the Social Security Administration.  File Form SS-5, Application for a Social Security Card.  You can get the form on SSA.gov or call 800-772-1213 to order it.  The name on your tax return must match SSA records.  A name mismatch can cause problems in the processing of your return and may delay your refund.

If you lose health insurance coverage because of divorce, you are still required to have coverage for every month of the year for yourself and the dependents you can claim on your tax return.  You may enroll in health coverage through the Health Insurance Marketplace during a special enrollment period, if you lose coverage because of a divorce.

If you purchase health insurance coverage through the Health Insurance Marketplace, you may get advance payments of the premium tax credit.  If you do, you should report changes in circumstances to your Marketplace throughout the year.  These changes include a change in marital status, a name change, a change of address and a change in your income or family size.  Reporting these changes will help make sure that you get the proper amount of financial assistance.  This will also help you avoid getting too much or too little credit in advance.

You may need to amend your previous returns to include alimony received or paid that was not included on your returns. Just remember, for every tax problem there is a solution.

Constant W. Watson III, CPA, CTRS, is both a Certified Public Accountant and a Certified Tax Resolution Specialist. He is one of only three Certified Tax Resolution Specialists in the State of Illinois who is certified by The American Society of Tax Problem Solvers. He has over 30 years of income tax and accounting experience. For a Free Consultation, call (708) 206-9900 or visit http://www.constantwatsoncpa.com.

 

Also On The Chicago Defender:
comments – Add Yours