Timing Your Divorce For Tax Purposes | Divorce Lawyer for Tax Considerations
December 23, 2016
Something most divorcing couples don’t realize as an issue is when to finalize their divorce. This is a problem that arises when the divorce can easily be finalized at the end of an existing calendar year or at the beginning of the new calendar year. There could be important tax consequences depending on which year the divorce decree is signed by the judge and filed by the clerk.
In Arizona divorce cases, the parties will submit their decree to the judge. The judge will eventually review and approve the decree. The judge signs the decree and forwards it to the clerk for processing. Your official divorce date is the date the clerk files the divorce decree in your case. The judge’s signature by itself is not controlling.
If you file your divorce case in the current calendar year, you will be unable to file taxes jointly. The Internal Revenue Service does not permit a couple to file joint tax returns for a year in which they got divorced. So if you would benefit from filing taxes jointly, and if you have agreed to file taxes jointly, and if you are close to the end of the year (November or December), you may want to wait until the beginning of the new calendar year to submit your signed divorce decree to the judge for review and approval. Otherwise, you run the risk that the judge will quickly sign your Arizona divorce decree and the clerk will file it shortly thereafter, all during the current calendar year, causing you to lose out on potentially large financial benefits – such as a lower tax rate or write-offs that only apply if you file jointly.
You should consult with your tax professional to determine whether filing jointly or separately will be best in your particular situation. Your divorce decree will usually specify which way you are required to file, as this is often a point that is addressed during negotiations. Sometimes it makes sense to file separately; other times it makes more sense to file jointly. It all depends on a variety of factors that will be unique to your situation.
Occasionally a judge will agree to “hold” the decree until after the calendar year if a joint request is made to the court. The judge will then sign the decree in the new calendar year so that you won’t ruin your opportunity to file jointly if that is what your decree states with regard to the filing status for that particular year.
There are a number of other timing factors that are important to keep in mind as you go through your divorce process. Come in for a consultation so that we can discuss your specific situation and figure out what is the best thing for you to do in your case. Of course, we may need to consult your tax professional in order to make a final determination.
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