Should divorcing spouses file a joint income tax return or separate returns?
This is one question almost all divorcing couples must answer. Couples who are separated but not divorced may file joint returns. It is not uncommon for a divorcing couple to remain legally married for some time -- months, at least -- until their divorce becomes final. For example, a couple separates in March, decides to divorce in June and sets to working on the property settlement but is still legally married on Dec. 31.
Basically, a divorcing couple has three options: 1) file jointly (called "married filing jointly"); 2) file married as separate people (called "married filing separately"); or 3) under certain circumstances, file as a single taxpayer (when they are "deemed unmarried" or "head of household").
For wealthy couples, tax considerations may mean an extensive analysis that considers a number of factors, including the incomes and deductions of both spouses, number of dependents, tax credits, applicable tax rates and contributions already paid to avoid penalties.
Most middle income couples find it advantageous to file jointly, and they can file jointly if they are married as of midnight on the last day of the tax year (Dec. 31). Despite their marital strife, couples opt for this because married filing jointly results in the lower total tax bill than any of the other options.
If they file jointly, both of them are responsible for the taxes due. Each spouse is responsible for the entire debt because married couples have joint and several liability.
Sometimes, a married person may file independent of his or her spouse and therefore file married filing separately. This becomes more complicated, depending upon whether a person lives in a common law (generally equitable distribution) state or in a community property state, and many couples do not do it because "[m]arried filing separately typically results in the highest possible combined total tax." In community property states, which are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin, and (by election of the spouses) Alaska), the division of income and expenses is governed by special rules because in these states each spouse has a claim on the other’s income.
Spouses who have been divorced or are legally separated are single taxpayers. A currently married person may be deemed unmarried and able to file as a single taxpayer if he or she is 1) unmarried or "considered unmarried" on the last day of the year, 2) paid more than half of the upkeep of the household during the year, 3) have a "qualifying" person, such as a student, living there, and 4) do not have a dependent parent living with them. This category may include an abandoned wife with minor children. Sometimes widows and widowers avail themselves of this filing status. Taxpayers who have become single as a result of a divorce may find it advantageous to file as head of household because the tax rates are lower than those applicable to unmarried people.