Divorce at the end of the Calendar Year
Many couples file divorces near the end of the calendar year. There are no particular advantages or disadvantages to parties who file at this time; however, there are a few financial matters to consider.
First, if couples file in states that do not recognize a technical “legal separation,” then the couples have to consider the federal and state income tax considerations. The Internal Revenue Tax Code provides that parties have to file as one of the “married” categories, such as “married” or “married filing separately,” if they are married at 11:59 PM on December 31 of any year.
Of course, if the divorce is final before the end of the year, the parties are then single on December 31 and have to file as single persons. They may qualify for other designations such as “head of household,” but again, the primary focus here is filing as a married person vs. filing as an unmarried person. In sum, if the parties are not married then they cannot file as married persons.
If parties file separately, then they have to work cooperatively to determine who will claim eligible children and other eligible tax deductions and credits. If one party files unilaterally in a fashion that substantially and financially benefits that person but creates a liability or shortfall for the other person, when other options were available, that person will likely have to compensate or reimburse the other person at the end of the case. This is because the income for the year and the associated tax liabilities are likely going to be considered as marital assets and liabilities. Therefore, it is best to work cooperatively to the benefit of the joint parties, both financially and from a tax perspective.
Please note, the undersigned is not an accountant nor a tax expert and the information herein is not offered as or intended to be accounting or tax advice. Rather, these tidbits of information are intended only to provide the reader with “food for thought,” so that the reader may retain an accountant to provide comprehensive tax advice and consider the tax consequences of going through a divorce during tax deadlines.