Married couples going through a divorce that is not yet final on the last day of the year are often confused about how to file their tax returns. The major thing to realize is that they are still married in the eyes of the IRS for their federal taxes and in the eyes of the California Franchise Tax Board for filing California taxes.
This means they cannot file under single status because they are not single. This is true no matter how long they have been separated and not living together. They are still married in the eyes of the law if there has been no final court judgment.
Federal Tax Filing Status: Still Married
Married filing jointly. Those who are still married on January 1, 2022, at 12:01 a.m. should file as “married filing jointly.” This is the best for both parties unless there is an element of distrust by one party as to the information that is being included in the tax return.
This option saves the couple money in that they only have one tax preparer to pay instead of two. But if there is any suspicion of fraud, the parties should file separately.
Married filing separately. This may be the best option when there are trust issues. It does cost the couple a little bit more since they must pay two separate tax professionals to prepare their individual tax returns.
Another factor is that the two professionals who are preparing the tax returns must coordinate with each other on issues like which party is claiming the children as dependents and how the income is being split.
Tax Filing Status: Divorced
Even if the couple was married throughout the entire year, and the divorce was only finalized at the last minute on December 31, 2021, at 11:59 p.m., the couple is divorced, and they cannot file jointly. Their options are:
Single. If you are not married, you simply file as single unless you qualify as head of household.
Head of household. There are quite a few rules that apply. For example, you must have contributed more than half of the financial upkeep of a home for yourself and a qualifying person. A tax professional can help make sure you are eligible to file under this status.
For more information about federal or state tax issues when divorcing, contact us at Heberger & Company an Accountancy Corporation. We can help whether you are using the collaborative divorce process or divorcing by traditional litigation. You may call us at 559-227-9772 to schedule a free consultation.