Should we file for divorce before June 29th?

Getting married in 2016? Or considering finalizing your divorce in 2016? Your status makes a difference for your taxes.

The most important thing to remember is that your marital status on the last day of the year (December 31, 2016) determines your marital status for the entire year for the purposes of income tax filing.

Married in 2016?

First, let’s go over some of the IRS rules and benefits for all of those couples getting married this year.  

If you get married at any point in 2016, you are now required to file taxes either as married filing separately (MFS) or married filing jointly (MFJ) for any income you earn in 2016. What this means is that when you go to file taxes next April, you no longer have the option of filing as a single person.

For most couples filing a tax return as married filing jointly provides a beneficial tax outcome. Married couples filing a joint return can claim two personal exemptions instead of one and can use a standard deduction of $12,400 verses the single taxpayer deduction of $6,200. You can also choose to itemize your deductions for benefits like mortgage interest payments.

Another benefit of getting married this year is that spouses can give each other unlimited gifts without the gift tax limits.

All being said, the change in status is not necessarily a win for many professionals as the marriage penalty can start to impact your tax rate. You can determine if you are going to be impacted by the marriage penalty.  

Divorced in 2016

Under the IRS rules, your marital status on the last day of the year or December 31, 2016 determines your marital status for the entire year.

In California, the Court will not issue an official decree of divorce before 6 months from the date of filing and serving of the Petition for dissolution (California Family Code 2339). This means you need to start the process (file) before July 1st.

It is important to remember that most of the biggest taxable events are not necessarily part of the divorce process itself, but actually occur in the years that follow as a result of the divorce settlement, like the sale of a home, capital gains, and who will be able to claim the children as dependents. These won’t really be affected by whether you get divorced in 2016 or 2017.

Here are some common tax credits and exemptions that could impact your decision to file before June 30th, 2016, though:

Children

If you have children, one important tax issue to determine who will take the deductions for a dependent child. This is because the tax implications are important. For each dependent a parent can deduct $3,900 from their federal taxable income.  In order to qualify, the child must live with the parent claiming the exemption more than half of the year and be under the age of 19 at the end of the year. Often parents will alternate who gets to claim the exemption from year to year.

If you are able to get a final divorce decree by December 31, 2015 and file as single another benefit may be that one spouse can claim Head of Household. In order to qualify for this status, you and your ex must have lived apart for the last six months and the claiming parent also has to pay more than half of household costs. In this case, the other spouse files his/her return as single.

Mortgages

Another tax benefit to be aware of is the payment of mortgages.  The person who stays in the marital home may be able to take advantage of one of the most popular tax credits which is the mortgage interest deduction. The mortgage interest deduction is the part of your monthly payment that covers the interest you pay on the mortgage.

Property Taxes

The last issue to be aware of is property taxes. If both parties have made any estimated property tax payments this year, then you have two options. First, one party can claim all of the payments or second the payments can be divided between the parties pursuant to an agreement. These payments should be reflected on your tax return.

Tax issues can be complicated, especially when you are changing your filing status from married to single. Consult with a family law attorney and tax professional to make sure you are aware of the risks and benefits associated with changing your tax status.

You can contact me at Amanda@gordonfamilylaw.com for more information.. 

What is the mother of my child using the child support money for?

Bay Area Family Law attorneys will explain to clients that even if you are the parent paying child support, there is no court authority that would require the person receiving support to render an accounting of how child support funds are used. If you are considering filing for a modification of child support, you can contact me at Amanda@gordonfamilylaw.com for more information.

How to calculate child support?

Formula child support is a share of the parents' “net monthly disposable income” (Fam.C. § 4055(a) & (b)), computed by totaling “annual gross income” (per Fam.C. § 4058), less allowable deductions to arrive at “annual net” (per Fam.C. § 4059) and then dividing by 12 to yield “monthly net” (per Fam.C. § 4060).

A quick way to check what child support will be is too use the DCSS calculator here: https://www.cse.ca.gov/ChildSupport/cse/guidelineCalculator

What is service of process and why do I need proof?

Getting a divorce takes time, money, and patience. One of the ways your patience may be tested is the numerous forms and steps that it takes to properly start the dissolution time clock. Remember, in California, the earliest a divorce can be finalized is six months after the dissolution filing is complete. 

The first step is for one party to file these forms:

• Petition — Marriage/Domestic Partnership (Form FL-100). On this form, you give the court some basic information about your marriage and/or domestic partnership, and you ask for the orders you want the court to make.
• Summons (Family Law) (Form FL-110 | video instructions ).  This form contains important information for you and for your spouse or domestic partner about the divorce or separation process. It contains some standard restraining orders limiting what you can do with your property, money, and other assets or debts

The second step is to serve these forms on the opposing party (or spouse) and both give them a blank response and file something called a Proof of Service of Summons form:

• Fill out the Proof of Service of Summons (Form FL-115).  
• Give the Proof of Service to you. If your spouse/partner was served by mail and Notice and Acknowledgment of Receipt, make sure your server also gives you the Notice and Acknowledgment of Receipt — Family Law(Form FL-117). 

What if you forget to fill out the Proof of Service of Summons?

After service is made, proof of this service must be filed with the court within 60 days of completion of service. However, if the opposing party appears in the action by filing a responsive pleading, this step is not necessary.

If service occurs after the filing of the petition and summons, then a Proof of Service can be filed as a separate document.  There will need to be a caption on this form because the court cannot add to your case file without a caption.   

The filing for dissolution is not complete until this step has been taken. You can contact me at Amanda@gordonfamilylaw.com for more information.

IRS More Aggressive in Divorce Support Agreements Reviews

Bay Area Family Law attorneys should advise all clients that the IRS is getting more aggressive in reviewing support agreements—and this could have tax implications.

In a recent case, a couple divorced over a decade received an IRS notice regarding their support payments and an assertion that part of the support was actually child support over all those years. The implication was that the person paying the support would have to claim income from payments that the IRS deemed should have been child support.  

Speak to a family lawyer if there are complicated tax and divorce planning aspects for your case. You can contact me at Amanda@gordonfamilylaw.com for more information.