People who have recently been divorced or who are still going through the process will often make costly mistakes when filing their tax returns. The good news here is that the majority of those mistakes can be avoided if both parties to a divorce are willing to cooperate and communicate openly with each other and not procrastinate about the issue of taxes.
We know that may be a lot to ask in some cases, but it also might be the one thing that helps you avoid an IRS audit, tax penalties and other serious consequences after your Texas divorce.
Filing jointly: If you are in the middle of a divorce now or if you had divorce case finalized last year, you can choose "married, filing jointly" or "married, filing separately" when you file your taxes. The general rule is that it's better to file separately to avoid being held jointly liable for any misinformation on the return. Also keep in mind that a joint return cannot be amended once filed, whereas a separate return can be.
Child-related tax deductions: The "Head of Household" dependency deduction is the big one, and can only be claimed by one parent for each child. Where people run into problems (and by "problems" we mean an IRS audit) is when both parents try to claim it for the same tax year.
For couples with an even number of children, the matter is often decided by splitting the deduction. For example, if there are two children, one spouse would claim the HOH status for one child and the other spouse would claim it for the other child. With an odd number of children, reaching an agreement can be more difficult. If spouses do not address this issue in divorce negotiations, the spouse who has custody of a child or children more than 50 percent of the time gets to claim the HOH deduction by default.
These are just two of the most common sources of trouble. There are many other potential tax pitfalls to avoid, however, and you can learn about these by speaking with an attorney or accounting professional about your unique situation.
Source: Business Insider, "The Top Tax Traps Divorced Couples Are Walking Right Into," Mandi Woodruff, April 3, 2012