Are You Still Married by IRS Standards?

Paying your taxes is a hassle under the best of circumstances. But when you are separated and waiting for your divorce, it gets even more difficult. Do you know how to file your taxes while you and your spouse are waiting for the judge to make your divorce final?

Filing them incorrectly can have long-term consequences and associated fees. So make sure you understand exactly what you need to do beforehand.

The Options

Even if you are separated, the IRS will consider you still married for the whole year—if you do not have a final divorce decree or separation maintenance by the last day of the year. As such, you must choose between two filing options: married filing jointly or married filing separately.

If you do have separation maintenance, you have the ability to file as either single or head of household. However, in this article, we are going to focus on the differences between married filing jointly and married filing separately.

Married Filing Jointly

Married filing jointly means you and your spouse are splitting your tax responsibilities (and your refund). While this option can seem advantageous, keep in mind that you are also agreeing to help your spouse shoulder the responsibility for any taxes, penalties, or interest due to the IRS at the end of the year. If the government was entitled to a portion of your spouse’s income for the previous year, you are still on the hook for the final bill.

Did you spouse pay your taxes late? You are still liable for any penalties and interest accrued due to their negligence—even if it was not your responsibility to pay. According to the IRS, this responsibility still applies, even if your divorce decree states otherwise.

How can you be relieved from joint liability? The IRS offers three separate types of relief:

  • Innocent spouse relief
  • Separation of liability
  • Equitable relief

Married Filing Separately

Married filing separately opens you up to pay more in taxes than you would if you filed jointly. However, it also gives you some degree of separation from the shared responsibility of taxes, which the two of you would owe together. Unfortunately, you can also lose some tax credits, including the earned income, adoption, and higher education credits.

When filing separately, both spouses must commit to filing the same way—by selecting either standard or itemized deductions. Your child-tax credit, retirement-savings-contributions credit, deduction for personal exemptions, and itemized deductions will all be recalculated at reduced income levels. (For those married filing jointly, they’ll be reduced by half.)

When are you considered unmarried?

The IRS has very specific standards that you must meet in order to be “considered unmarried” for the year:

  • You must file a return separate from your spouse. (It can be filed as married filing separately, single, or head of household.)
  • You paid more than half the costs for the upkeep of your home throughout the year.
  • Your spouse did not live in the home during the last six months of the tax year.
  • Your children lived in the home more than half the year, and you are able to claim them as an exemption.

If you are “considered unmarried” by the IRS standards listed in Publication 504, then you have the option to file as head of household at the end of the tax year.

While this article is just a very general introduction to filing your taxes while  separated, it is a good place to begin when the deadline is quickly approaching. For any further questions you might encounter, the IRS clearly lists the guidelines for when and how to file your taxes in their Publication 504.

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Shawn Leamon, MBA, CDFA is author of Divorce and Your Money: The No-Nonsense Guide and host of the Divorce and Your Money Show on iTunes. Learn more at  www.divorceandyourmoney.com.

Shawn Leamon, MBA, CDFA

Dallas, Texas

Shawn C. H. Leamon is Managing Partner of LaGrande Global, a firm that helps successful families manage large financial transitions like divorce, inheritance and selling a business.

He earned his Bachelor of Arts from Dartmouth College, double majoring in Economics and Philosophy, and his Masters in Business Administration at Spain’s IE Business School.

Before founding LaGrande Global, Shawn helped manage $1.1 billion in client assets at Bernstein Global Wealth Management. He also worked as a credit research analyst at J.P. Morgan. He is a Certified Divorce Financial Analyst, and he has been an advisor to numerous high-stakes divorce cases.

Shawn is the author of two well-received finance books: Managing Private Wealth: Principles, and Divorce and Your Money: The No-Nonsense Guide, both published in 2016.

In his spare time, Shawn is an ultra-endurance athlete and has competed in events as long as 24 hours. He is an Eagle Scout and a member of the Alumni Board of Greenhill School.