If you are separating from your spouse and not yet divorced, how you file your Federal and State of California income taxes is an important financial decision to make. It can also be confusing and complicated by the stress of your separation.
As long as you are still legally married, you can either file a joint tax return as a couple, or two individual returns. If you decide to file jointly, you can’t decide later to amend and file your return separately. If you decide to file separately, you can amend your return and file jointly later, for up to three years from the due date of the return.
Below are some things to consider in making your decision. Our best advice: work with your tax accountant to decide whether it is most beneficial to file joint or separate tax returns.
Option 1 – File Taxes Jointly with your soon-to-be-ex
If you are simply separated from your spouse (not yet divorced) you can file a joint tax return. If you owe taxes, each of you is jointly and independently liable to pay them. If your soon-to-be-ex is a tax cheat, filing jointly may make you the target of an audit. If you receive a tax refund, the refund will be mailed or auto deposited into your designated bank account. The IRS will not split the refund for you.
A chief consideration for filing jointly is you’ll want to decide in advance how you will split or apportion a refund as well as split or apportion a tax liability. To make everything absolutely clear between you, you can draw up a Stipulation and Order. A written Stipulation and Order includes your agreement with your ex and both of your notarized signatures. Your agreement must be signed by a judge.
Option 2 – File Taxes Separately without pooling community income 50/50
Both you and your ex can file your own tax returns, declaring your individual income, deductions, withholding, etc. Because your combined earnings are considered community property until you are legally separated, it is important to agree with your ex how your community property income, deductions and withholdings (earned and taken before you were legally separated) will be split before you file. We recommend that you get your agreement with your ex in writing.
Option 3 – File Taxes Separately, Pool Community Income, Add in After-Separation, Separate Income
In this scenario, community income, deductions and withholdings (earned and taken before you were legally separated) are considered equally on each person’s return. Individual earnings are then added to that amount. This is the most technically correct way to file individual tax returns, when you are separated.
If you have questions about drawing up clear tax agreements with your ex, please contact our office for a consultation.
Attorney Christina Sherman is a Marin County CA family law attorney and Certified Family Law Specialist, specializing in divorce, child custody and support, marital contracts and other family law issues.
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