By: Jessica A. Saldin,
Starting in January each year, almost every party in a divorce case has the same question, “How do I file my taxes for the prior year?” As long as you were legally married for the pendency of the entire prior year, you could file married filing jointly. However, many parties ask themselves if, being in the middle of a divorce, that is the best way to file. How to file taxes during a divorce is not an uncommon question.
The first goal is, obviously, to see if you and the other party can agree on how you will file. If you cannot agree, though, the other option is to get guidance from the court as to how you should file. If you have a status conference in your case between the beginning of the year and the filing deadline, you could ask the judge if he or she has any general guidance. The general ruling of the court is that parties to a divorce case should file taxes in the manner most beneficial to both parties. This does not mean that if it is most beneficial to you to file separately you should file in such way, regardless of the impact on the other party. This means the method of filing should be the most beneficial to both parties combined (i.e., it may not be the absolute best way for one party to file but it is better overall for both parties combined). If you do not know which way would be the most beneficial, it is advised that you ask a CPA to run scenarios for both individual filings and a joint filing. After you have both scenarios, average the individual filings and see if that outcome would be better, overall, for both parties or worse. For example, if filing separately would get one party a refund of $5,000 and the other party would owe $2,000 and filing jointly would get both parties a combined refund of $4,000, the most beneficial filing for both parties is filing jointly (that is a combined refund of $4,000 as opposed to a combined net refund of $3,000 from the individual filings). To be clear, this does not mean you have to file jointly. If you both agree to file separately, it is highly unlikely the court would force you to file jointly even if that would be most beneficial. However, if you are unable to reach an agreement, and need to ask the court for assistance, filing in the manner most jointly beneficial is the most likely outcome from the court.