How Divorce Affects Your Income Tax Return

Just When You Thought Divorce Wasn’t Difficult Enough

Going through a divorce can be intensely emotional, stressful and overwhelming. It often comes with significant changes to your lifestyle, as well as financial burdens. However, did you know that divorce can impact your income tax return as well?

Even when you hire a professional accountant to prepare your tax return, it is important that you understand how your return will be affected by your divorce. At Stevens Pierce & Associates, CPA’S in Twin Falls, ID, our team is here for you to help you with your taxes during this difficult time and to ensure your tax return is compliant.

Do You Qualify to Claim Your Child as a Dependent?

You can’t rely on your divorce decree to give you guidance as to how your taxes will be affected. This is because often, judges and attorneys don’t have the required knowledge of IRS requirements. Therefore, even if it is stated that your child will remain your dependent and that you can claim your child for tax purposes, this might not always be accurate. An accountant will need to know with which parent the child spend the most nights over the past year. This will determine custody for tax purposes. If you are the non-custodial parent and both parents contributed at least 50% of the child support last year, your former spouse will need to sign a Form 8332.

What is Form 8332?

By filling out and signing Form 8332, the custodial parent releases their claim to the child as a dependent and to claim the child tax credit. However, it does NOT allow the non-custodial parent to claim:

  • The child and dependent care credit
  • Head of household filing status
  • Earned Income Tax Credit
  • The income exclusion of employer-provided dependent care assistance

Information We Need From You

We will need to know with which parent the child spent the most nights, and we will need sufficient proof that the child did in fact spend more time with you than the other parent. You cannot claim your child as a dependent without this information, as you cannot depend on the divorce decree to give you this right. If you are the custodial parent, in order for your former spouse to be able to claim the child as a dependent, you will need to sign a Form 8332, which releases your claim to the child as a dependent.

Why is All of This Important?

It is necessary for your tax return preparer to gather sufficient, accurate information from you in regards to child custody, because each non-compliant occurrence in your tax return will cost the preparer $510 for failing to adhere to standards. Therefore, asking certain questions is a required part of the process for the preparer.

When you are going through (or have already gone through) a divorce, the last thing you want to worry about is submitting a non-compliant tax return by improperly claiming your child as a dependent. Let our accountants at Stevens Pierce & Associates, CPA’S give you the peace of mind of knowing your taxes are being done right. For any questions, or to schedule an appointment, contact us today at 208-734-8662!