If you haven’t yet begun the divorce process or if your divorce (or legal separation) wasn’t final at the end of last year, you and your spouse are still married as far as the Internal Revenue Service (IRS) is concerned for purposes of your 2021 income tax returns.
That means you’ll need to make some important decisions before you file. Let’s look at a couple of important considerations.
What filing status should you choose?
You can both file as “married filing jointly” or “married filing separately.” You’ll need to agree on which to choose. Another option for one of you may be “head of household.”
For a person to file under this status, they must have:
- Been the residence of a dependent child (or another qualifying dependent, like an elderly family member) for more than half the days of the year
- Lived separately from your spouse for the last half of the year
- Paid for over half the cost of maintaining the home during the year
In many cases, it’s financially advantageous to file one last joint return as a married couple if you’re able to trust one another and do so amicably. Only you can make that decision.
What if your spouse has been dishonest with the IRS?
A lot of financial secrets and lies can come out during a divorce. You may have learned that your spouse failed to report some of their income, engaged in some other kind of financial fraud or was just very bad at doing taxes. If any of those are the case, it’s best to start filing your taxes separately (with your own accountant or tax preparer).
The IRS has three options, which are innocent spouse relief, separation of liability relief and equitable relief. These can help minimize or eliminate the liability of people who unknowingly filed an inaccurate return with their spouse.
Innocent spouse relief is the best option if you can qualify. If your spouse owes money in back taxes and penalties because of their errors or dishonest reporting, you’ll want to address that in your divorce settlement so that you aren’t left to foot the bill or otherwise be penalized for something in which you had no role.