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Divorce and separation can change your IRS obligations

All married couples have arguments. Unfortunately, when these disagreements become the norm and not the exception to an otherwise mutually beneficial relationship, it may be time to take different paths.

Divorce is a life-changing series of events that doesn't happen in a vacuum. Separating your life from someone you thought would be a partner for life affects everything. The lives of children change, finances are vastly altered and come Tax Day, the way you deal with the IRS may be quite different as well.

Here are a few items to keep in mind when filing your individual return.

  • Child support: The basic idea behind child support is that the money is going toward the expenses associated with raising a child. These payments, therefore, are not considered an expense or income. They are not a tax deduction for the non-custodial parent. On the other hand, the parent receiving the payments does not have to pay taxes on them and should not calculate them as income on an annual tax return.
  • Alimony paid: Alimony is the legal obligation to provide support in the context of divorce. Generally, these payments begin after divorce but temporary alimony may be granted during the process. Payments made by divorce decree or in a separation agreement are tax deductible. You will also be required to list his or her social security number on the 1040 filing. Those made voluntarily, without court order are not deductible.
  • Alimony received: If you receive alimony payments, they are taxable income during the year you receive them. It's important to remember that while taxes are not withheld from alimony payments, this income may increase your overall tax liability. If you are gainfully employed, having more taken out of your paycheck can help offset a tax hit. You can also make estimated tax payments during the year so that you won't feel a major crunch at tax time.
  • Spousal IRA: Once a final divorce decree has been established, you will no longer be able to deduct contribution to an ex-spouse's traditional IRA. However, you may be able to deduct payments made to your own traditional IRA.
  • Name Changes: If you decide to re-establish your maiden name or just change your name after a divorce, remember to notify the Social Security Administration. In order to file a valid annual tax return, the name on the tax return must match what the SSA office has on file.
  • Separate Maintenance: Some couples feel that their marriage may be still salvageable and they want to establish a legal or trial separation while they work on it. Other couples may be opposed to divorce for a variety of reasons including religious convictions. Although uncommon, financial support in these situations is basically viewed as alimony without the divorce. You can expect that the same general rules that apply to spousal support in divorce also apply to separate maintenance.

Going through divorce can be an extremely stressful time in your life. So many things are changing that it's difficult to keep track of them all. Keep in mind that legal professionals are here to help you get through this trying time.

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