How to Handle Previous Refunds for Taxes in a Divorce

By Kay Lee

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Since divorce is a process, you may be considered legally married for a period of time after you and your spouse have separated, with your joint life together continuing until the divorce is finalized. During this time, you will undergo the process of unwinding your joint life together, especially as it pertains to property and financial matters. You may be owed a refund from any joint taxes filed during the separation period, but before the divorce is finalized.

Review your tax filings to determine if you and your soon-to-be ex-spouse are entitled to a tax refund.

Determine your overall strategy for the division of property, which includes bank accounts and money owed to each of you.

Negotiate, as part of your settlement agreement, how to divide your tax refund, as it is money owed to you as a couple for a period of time when you were still considered legally married. Depending on the state where you live, the tax refund may be considered community property if earned during the marital period.

Divide or assign the tax refund in the settlement agreement.

Tips

The year your divorce is finalized is the year you should file as single. However, if you separate in one calendar year and your divorce is finalized in the next, you may file as “married filing separately” or “married filing jointly” depending on your mutual agreement, which may be based on which status is more tax advantageous.

Warnings

If your spouse takes the tax refund before the settlement agreement has been finalized, you may want to consult a divorce attorney to determine how to offset that amount in the settlement agreement.

If you filed taxes separately in a previous year and one of you is owed a refund, unless you lived in a community property state, the spouse whose return resulted in the refund receives the refund.

References

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