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Handling tax time during the negotiation of a divorce settlement

Putting the words divorce and taxes into the same sentence may make some Pennsylvania residents cringe. However, taxes are an important consideration when negotiating a divorce settlement. The parties may have been living apart for months, but according to the IRS, as long as no final decree has been filed, a couple is still married for tax purposes.

That means that come Dec. 31, if the parties’ divorce is not final, they will need to file as a married couple. This can be done a couple of different ways. The parties can either file as married joint or as married separate. The tax advantages of both statutes vary. Filing married joint may keep the parties in a lower tax bracket, but this also makes both liable to pay any taxes due.

Filing married separate could put each party into a higher tax bracket, but each party is responsible for his or her taxes that may be due. Certain credits and deductions may also not be available under this status. Making the decision as to how to file taxes will need to be part of any settlement negotiations.

However, those negotiations will need to cover more than the current tax year. Some tax considerations will continue to need attention for years to come. For instance, determining which party gets to claim the children in which tax year could require a significant amount of negotiation. Further, a spouse receiving alimony may need to be careful since it is taxable.

Any agreement regarding tax matters should be put into the divorce settlement. This will ensure that if one party fails to comply with the agreement, the other may go back to the Pennsylvania courts to seek relief. Once the settlement is completed, the parties can go their separate ways with some assurances that the IRS has been dealt with.

Source:, “How Marriage And Divorce Can Impact Your Taxes“, , April 5, 2014


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