A California couple considering divorce might find that filing federal taxes jointly is easier, but this is one situation in which separate filing may be warranted. Married couples, including same-sex couples, may file jointly or separately. Married parties cannot file as singles. Those involved in domestic partnerships and civil unions, however, cannot use either of the designations intended for married individuals. A joint filing tends to be the most sensible financial choice for married couples. However, there are cases in which separate filings are advisable.
A couple is considered to be married if the marriage is still intact on the last day of the tax year in question. However, an in-process divorce might warrant separate tax filings as the parties begin to separate their financial affairs. Whether it is a divorce involving significant assets or a simple situation with few assets, this is a time that can facilitate the move toward handling one’s finances apart from the marriage. Another scenario in which separate tax filings might be best is when one spouse’s tax practices are questionable or even illegal. A joint filing obligates both parties to handle any fines or penalties related to the return.
There are numerous benefits that could be lost by filing separately without necessity. For example, credits for children, earned income, education, and elderly or disabled credits are not available for those who opt to file separately. Taxes on Social Security benefits can be greater, and tax rates shift downward for separate filing. One of the best ways to evaluate the pros and cons of both approaches is to create drafts of both options to determine the best route.
The legal steps in preparing for a high asset divorce could help an individual to also prepare for financial activities such as tax filing. A full review of assets and finances is important as the divorce process is initiated.