How To File Taxes When Separated or Divorced
IRS Publication 504 is the instructions booklet that covers tax filing status for Divorced or Separated Individuals, and is where one should go so that clarity occurs around what one’s marital status is, as far as the IRS is concerned. The IRS takes your marital status as of 31-December of the tax year. If you are married, but are considering a separation, the IRS still views you as married. You and your spouse do have the choice of filing jointly or separately if you both wish. If you have filed for separation or divorce, but it is still not final by the end of the year, then your status is still Married, Filing Separate. Apparently, according to the experts, if you and your soon to be ex-spouse can amicably agree to it, you can still fill Married, Filing Joint and get whatever benefit it gives you both. If the separation or divorce is final by the end of the year, then by the IRS rules, you are required to file Single. In one scenario where your separation or divorce decree is not yet final, if you are living physically separate from your estranged spouse for six months or more in the tax year, and if you are supporting a child, you are allowed to file as Head of Household. Once the separation or divorce decree is final, and you are supporting a dependent, then you are Head of Household, and must file as such.
Given that you may have more than one possible marital filing status available to you while you are in this shifting situation, it is very worthwhile to calculate your taxes under the various options available and see which filing gives you the best return. Dependents, schedule A, earned income credits, and other deductions play out differently under different marital statuses. Married, Filing Jointly is the status that results in the lowest taxes, so it is worthwhile if you can agree to it one last time. If you file Married, Filing Separate, alimony can be claimed, if paid, of course.
Head of Household benefits over Single with a higher standard deduction and lower tax rate. If filing Married, Filing Separate, it has the worst overall deductions and tax rate. In this filing status, both spouses / ex-spouses must file standard deductions or both must itemize their separate deductions. Each filer is accountable for only his / her taxes and paperwork. This is especially important if a spouse suspect the other spouse of falsifying a tax return. In particular and also lost are the following tax benefits:
• Tuition and fees deduction
• Hope or Lifetime Learning Educational Credits
• Student loan interest deduction
• Tax-free exclusion of Social Security Benefits
• Tax-free exclusion of US bond interest
• Child and Dependent Care Credit
• Earned Income Credit
• Credit for the Elderly and Disabled
Some experts recommend doing a comparison check between filing jointly or separately when the two spouses have a great disparity between their individual earnings. In some situations it does prove to be better to file separately.
Earned Income Credit (EIC) Explained
The Earned Income Credit (EIC), also known as the Earned Income Tax Credit (EITC), is designed to help you keep more of your hard earned money.
It is a refundable tax credit, meaning you could qualify for a refund even if you did not have any income tax withheld from your paychecks. This article explains who is eligible for it, how much its worth, and how to claim it.
Am I Eligible for the Earned Income Credit?
To qualify for the EIC, you must have earned income from employment, self-employment, or another source and meet specific rules. Your income has to be within certain limits and there's a cap on how much investment income you can make.
You're eligible if:
- You earned income from a job, your own business, or certain disability benefits. Unemployment income does not count as earned income, so if you only made unemployment income in 2014, you are not eligible to claim the credit.
- You did NOT receive more than $3,350 in interest and investment income. Examples of investment income include interest, dividends, and profit from selling stocks.
- Your filing status is Single or Married Filing Jointly. If you're Married Filing Separately, you are NOT eligible.
- You, your spouse and children, if applicable, all have Social Security numbers.
- You and your spouse can NOT claimed as a dependent or qualifying child on someone else's return.
- You either have at least one qualifying child OR either you or your spouse are between the ages of 25 and 64.
- If you have a qualifying child, you and your spouse's age don't matter
- If you don't have a qualifying child, you and your spouse's age do matter. One of you needs to be at least age 25 but under age 65 on December 31, 2014.
- You are a citizen or resident of the United States.
There are some other rare circumstances and edge cases, but this covers the majority of situations.
A qualifying child is:
- Your son, daughter, stepchild, adopted child, or their descendant (such as a grandchild).
- Your brother, sister, stepbrother, stepsister or or their descendant.
- Your foster child, placed with you by an authorized agency or court order.
- Age 18 or younger on December 31, 2014, unless he or she is a full-time student, in which case the student must be 23 or younger. A person who is permanently and totally disabled at any time during the year qualifies, no matter how old.
- A resident with you in the United States for more than half of the year.
The amount of the credit depends on a number of things - the amount of income you made. your marital status, and the number of qualifying children you have. See the table below for the amounts for Tax Year 2014 (for taxes filed in 2015).
How Do I Claim the Earned Income Credit
The only way to claim the EIC is to file a tax return, even if you do not owe any tax and are not required to file. As I mentioned earlier, the EIC is a refundable tax credit, meaning you could qualify for a refund even if you have not paid any income tax. Common Form supports the EIC, so file your taxes with us to claim this valuable credit.
you can claim eic if you have the filing status 'married filing separately'.
Single - You were unmarried or legally separated from your spouse under a divorce or separate maintenance decree on December 31st.
Married Filing Jointly - You were married on December 31st and both you and your spouse agree to file a joint return. On a joint tax return, both spouses are reporting all their income, deductions and credits on one tax return.
Married Filing Separately - You were married or legally separated on December 31st and you and your spouse wish to file separate tax returns. When filing separately:
- Each spouse is responsible for claiming their own income, exemptions, credits, and deductions.
- Each spouse must file using the same method of deductions. For example, if your spouse files a Schedule A for itemizing their deductions, you too will have to file using the Schedule A, even if your standard deduction would be more beneficial to you.
- Filing separately disqualifies you from various credits and deductions such as education credits, student loan interest deductions, child care credit and earned income credit.
Head of Household - You were unmarried or "considered unmarried" on December 31st as well as having to have paid for more than half the cost of keeping up a home for the year. In addition, if unmarried, you must having a qualifying person living with you in the home for more than half the year whom you can claim as an exemption. Married filers who are "considered unmarried" need to claim their child as a dependent to qualify for the status.
Qualifying Widow(er) - If you have a dependent and your spouse has died, you may be eligible to file as a qualifying widow(er) for 2 years following the year your spouse died. In order to use this filing status, all of the following must be true.
- The year in which your spouse died, you were eligible to file as Married Filing Jointly.
- Your spouse died in 2014 or 2015 and you have not remarried before the end of 2015.
- You have a child or stepchild (except for a foster child) whom you can claim as an exemption and lived with you all year.
- You paid more than half the cost of keeping up your home for the year.