On divorce, separation, and taxes

man and woman photoThe major life changes brought on by a divorce or separation are many. And while taxes might not be the main priority for someone in such a situation, the fact remains that divorces and separations have a number of tax ramifications that will need to be dealt with. Neglecting your tax duties during times of change can add the IRS to the list of potential headaches. Below are some of the primary FAQs taxpayers want to know when going through a divorce or separation.

Firstly, if a taxpayer is to change their name as the result of a divorce or separation, that person must make sure that their name matches the one with which the Social Security Administrations knows them. For it’s the name the SSA knows people as that has to be used when filing taxes with the IRS. Any discrepancies can cause serious delays in tax return payouts. Visit SSA.gov or call 1 (800) 772-1213 to request Form SS-5, or Application for a Social Security Card, to successfully and change your name.

On the topic of alimony, those that receive it must pay taxes on it. Since tax withholding does not occur with alimony received, it’s recommended that those that receive alimony pay quarterly estimated tax payments or increase the amount of tax withheld from other sources of taxable income.

For people who pay alimony, you may claim the payments as tax deductible only if the alimony is required by a divorce or separate maintenance decree. Voluntary alimony payments are not tax deductible.

Lastly, child support is not tax deductible. Child support is also not taxable as income.

Affordable Care Act considerations: If a spouse is to lose their health insurance due to a change in marriage status, that person must still carry health insurance, this according to the Affordable Care Act. Such a change is considered a life event which qualifies the taxpayer for a special enrollment period for health care coverage in the Health Insurance Marketplace.

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