When one is going through a divorce, there are many things that have to be considered. In cases where children are involved, they would naturally be the first priority. Other matters such as property division can become overwhelming in their complexity. One topic that California residents may not have at the forefront of their minds is the tax implications of divorce.
Some things are dependent on the dates on which they fall. If one’s divorce has not been finalized by the end of the tax year on December 31, then that person is still considered to be married and must submit the return accordingly. This can have a great impact on one’s financial affairs, and it is vital to ensure that papers are correctly completed in order to avoid any potential penalties.
Any changes to an individual’s name must also be done in a timely fashion, as names must be identical on both Social Security and IRS papers. If they aren’t, the return is likely to be rejected and a filer then faces problems caused by this delay. Financial matters can be further complicated by not knowing which costs and allowances are taxable, or tax-deductible. If both spouses have to file tax returns, the question of what is and isn’t allowable may become even more intricate.
Before proceeding with a divorce, it can be important that one seeks appropriate advice on California tax law, and explores all the potential tax implications. Mistakes made in the filing of returns could prove very costly to a spouse’s future. Giving consideration to these issues in advance may help to make the transition from marriage to divorce smoother.
Source: Scoop San Diego, “How Marriage And Divorce Can Impact Your Taxes”, NAPS, April 10, 2014