There is so much to think about come tax time related to divorce and children. Here are my tips toÂ help you take things step by step. Here is the second part of this series.
- Determine your filing status: Your marital status as of December 31st is what you use to file, even if you were still married for part of that previous year.
- Implications of child support: If you receive child support you do not need to claim that as income, however alimony you do. So be clear about the wording what everything is called in your agreement.
- Review your divorce agreements to be sure who will claim the children as dependents. If it doesnât specify then the custodial parent claims the exemptions. If there is joint custody, then the parent who has the child the greater number of days during the year claims the exemption.
- If you feel you should be claiming the exemptions when children spend less than six months of the year with you, then you need Form 8332. Get this signed and file it with your tax return.
- File first: if your ex is not going to cooperate and thinks they should claim the children, then file first. The IRS has to take the first claim and your ex will have to prove that they deserve the exemption claim.
- Child Care Credit: claim it if you are the custodial parent. And if you use SupportPay to keep track of all your payments, then you will have clear records of what to claim each year.
- Review all the legal fees paid during divorce: Some legal fees are not tax deductible, but others may be. Such as: any fees regarding taxes, fees from seeking advice concerning tax consequences of divorce, costs of preparing new title for a rental property, fees occurred to obtain alimony, etc. Be sure you keep track of what you pay, so you can claim what you are able. Again, using SupportPay to keep track of all of those payments will help you not forget anything, and give you an online storage for those payments and documents so you wonât worry about losing anything!
- Change your W-4. For the coming year ahead, be sure to change your deductions coming out of your paycheck, to either reflect extra withholdings, or put aside tax payments if needed. You want to avoid penalties at the end of the coming year. Youâve been through enough!