How to avoid tax filing mistakes after a divorce

On Behalf of | Jan 25, 2023 | Divorce

Life adjustments after a Pennsylvania divorce can take time. Most newly divorced individuals will have many issues to struggle with as they readapt to single life. Tax time can bring about many new questions, and finding the answers can become challenging when it involves children.

Understanding the rules

One of the first tax-related questions after a divorce relates to dependent deductions. How is it determined who can claim a child as their dependent? Some parents will assume the individual paying child support qualifies to receive the deduction. Others expect the parent with primary custody to have the right to claim the benefit. The IRS typically considers the custodial parent as the one with the right. Different arrangements and details can change this determination, so parents may need to discuss the issue with a tax professional before they file.

Making a compromise

Sometimes divorcing parents avoid confusion by adding the details to a settlement agreement. The estranged couple can determine during negotiations who gets the deduction and all other potential credits before finalizing the process. Divorced couples may amend their prior agreements or create a new contract to include tax filing details missed during the initial procedures.

Changing with time

Custody agreements, child support payments, and many other details change as children grow older and when parents change their lifestyles. Requesting an order modification to match the current situation is possible. Parents who previously shared custody may wish for one to have primary custody. One parent may make substantially more money than the other, making the deduction more valuable to the one earning less. Lifestyle changes can take place many years after a divorce, and the types of deductions and credits possible may also change.

Tax questions and many other financial questions can arise months or years after a divorce. Couples that can work together at the outset will have the ability to reduce confusion by having a clear guideline to work from in the divorce agreement.