I wanted to make things easier for those making the name transition by giving you an overview of the process.

Get a Matching Set (of Names)

When we got married 5 years ago, it definitely had a huge impact our lives, in more ways than one. When we got back from our honeymoon there was plenty to do. On my list was getting my name legally changed.

According to the IRS if you changed your name (including taking a hyphenated name) and the name on your tax return with your Social Security number doesn’t matched what the Social Security’s office has on file, then you can have problems getting your taxes processed properly.

First thing, first, go ahead and get a few certified copies of your marriage certificate. Whenever you make a name change, make sure you go ahead and get it updated with Social Security Administration.

Fill out the application for a Social Security Card(Form SS-5) and submit it either in person at the local U.S. Social Security office or U.S. Embassy. You must also submit proof of the name change. You can mail it to the office along with the required documentation.

No Time for a Name Change?

In a perfect world, you would get everything done and squared away. However it doesn’t always work that way.

What if you got married, but you haven’t had time to change your name with Social Security or your driver’s license? The deadline for filing your taxes is fast approaching, what do you do?

In that case, go ahead and file your taxes jointly as planned; just make sure to your use your name as listed on your Social Security card currently. Once your tax return is completed and processed by the IRS, you can go ahead update your name later.

Thoughts on Changing Names

Fortunately getting my name changed was a fairly easy task and I received my new card in a couple weeks. How about you? How many of you changed your name in 2012? How quickly did you get your Social Security card updated?

Today, we explore some important tax implications of divorce – and how to deal with them:

Property Settlements

(PrimeImageMedia.com)

Property settlement is likely to be the thorniest tax issue surrounding an upcoming divorce. The actual decisions regarding who gets what is not the tricky part – usually, each ex takes what the other one does not want, and what’s left of the couple’s total net worth gets split according to boilerplate ratios like 50/50 or 60/40. What makes property settlements a pain are the tax ramifications. Some assets (like a mortgage) involve tax liabilities or benefits while others involve none. Without special care, you could inadvertently agree to take something that sacks you with a gigantic tax bill.

To avoid these hassles, use the SmartMoney property settlement calculator which computes not just the fair market value of the possessions involved, but also the tax bill and the after-tax value of each item.

Child Support Payments

(banjo d)

Contrary to what some divorced couples believe, child support payments are not deductible on your personal income tax return. This strikes many as unfair, since one could argue that the receiving parent is benefiting from unearned “income” in the amount of the payments. That said, do not attempt to deduct child support payments or deduct them under a different name (such as “family support”) as this is guaranteed to be rejected by any IRS employee who spots it.

Since child support is not tax deductible, your only choice is to pay it for as long as your decree states. Consult your decree if you are unsure of when or under what circumstances your child support obligations end.

Child Exemptions

(bobby-james)

Another pressing tax issue stemming from divorce (assuming you have children) is who gets tax benefits and exemptions pertaining to the kids. In a February 2010 article, SmartMoney notes that these exemptions ($3,650 per child in 2009 and 2010) generally go to the parent who wins custody of the children. Alternatively, parents can agree amongst themselves to override this rule and let the spouse of their choosing claim the exemptions instead. Nor will letting your ex take the child’s exemption prohibit you from claiming head of household filing status (more on that later.)

If your divorce was especially bitter, and your ex is the custodial parent, it is unlikely that they will agree to turn these exemptions over to you. In a more civil divorce, it is certainly a possibility. Just make sure that whomever claims the exemption files a copy of Form 8332 (Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent) each year. The custodial parent must also sign this form no matter what.

Alimony/Spousal Support

(JMRosenfeld)

Alimony (spousal support) payments have unique tax considerations of their own. According to Lawyers.com, alimony payments are tax deductible for the ex who is paying them. If you are getting any clever ideas about disguising property settlement or child support money as alimony (and trying to deduct it) think again:

“If alimony appears to be “front-loaded,” which means that there was a concentrated payment within a very short period of time after the divorce, the IRS may consider the money to be property settlement funds (which are not deductible). Additionally, if alimony ends within six months of a child’s 18th or 21st birthday, this may trigger an investigation by the IRS to determine if the alimony is, in reality, disguised child support.”

Alimony is taxable to the recipient as well. Both spouses must also file separate tax returns as a prerequisite to alimony arrangements.

Head of Household Status

(Kamoteus (A Better Way))

Which ex gets to claim head of household filing status on their income tax return is another contentious divorce-related tax issue. Heads of households, SmartMoney points out, are “entitled to more generous tax brackets and a bigger standard deduction.”

In order for the IRS to consider you “head of household,” you need to file your own separate tax return. Furthermore, you and your spouse cannot have lived together at any time during the last 6 months of the tax year in question. You also must have a “qualifying child” who lived with you for more than six months of the year even if this child can be claimed as a dependent on your spouse’s tax return. Letting TurboTax ask the right questions will help you determine the best filing status for you.

1. Determine your filing status. Your marital status at the end of the year determines how you file your tax return. If you were divorced by midnight on December 31 of the tax year, you will file separately from your former spouse. If you are the custodial parent for your children, you may qualify for the favorable head of household status. If not, then you will file as a single taxpayer, even if you were married for part of the tax year.

2. Consider the tax implications of support. Child support is not deductible to the person who pays it, but alimony is. Likewise, the recipient of alimony must claim it on her tax return, but child support isn’t reported as income. If you rolled your support together into “family support” in your agreement, that makes it fully taxable to the recipient and deductible to the payer, just like alimony.

3. Don’t run afoul of the special rules regarding support. If alimony payments are concentrated in the first year or two after divorce, the IRS may consider the money to be non-deductible property settlement. And if alimony is scheduled to end within six months of a child’s 18th or 21st birthday, the IRS may consider the alimony, in reality, to be disguised child support.

4. Review your divorce decree to see who will claim the children as exemptions. If divorce agreement did not specify who claims the children as exemptions, then the exemption for your kids goes to the custodial parent. If you have joint custody, the exemption goes to the parent who has the child the greatest number of days during the tax year.

5. Get signed Form 8332 if required. If you are entitled to claim the tax exemption for children who spend less than six months of the year living with you, then you will need your ex-spouse to sign IRS Form 8332 (Release of Claim to Exemption for Child of Divorced or Separated Parents). A copy of this form must be filed with your income tax return for you to claim the tax exemptions for children not living with you.

6. File first if exemptions are an issue. If you are entitled to claim the children on your return, but your ex threatens to claim them instead, file early in the year. That way, since you’ve already claimed the children, the IRS will make your ex prove he or she was entitled to the exemption.

7. Claim the child care credit if you are eligible. If you are the custodial parent and you incur work-related child care for children under the age of 13, you may be able to claim a credit for a portion of the cost. Unlike the exemption, which can be assigned using IRS Form 8332, the child care credit is available only to the custodial parent.

8. Review legal fees paid during your divorce. Although most legal fees are not tax-deductible, fees you paid for advice concerning the tax consequences of your divorce can be taken as an itemized deduction on Schedule A of your tax return, as can fees incurred to obtain alimony. Other fees, such as the cost of preparing a new title for your rental property, can be added to the tax basis of your assets.

9. If you are employed, change your withholding on Form W-4. You can claim one additional exemption for every $3,600 or so of deductions, including alimony payments. If you are receiving alimony, consider asking to have extra tax withheld from your paycheck to cover your new tax liability.

10. Make estimated tax payments if withholding isn’t enough. If your withholding won’t be enough to cover your taxes for the coming year, set up quarterly estimated tax payments so that you won’t owe taxes and penalties at the end of the coming year.

Divorce may not be as inevitable as taxes, but it certainly brings complications to tax filing. Follow these ten tips, and the process should go smoothly in the future. Once your divorce questions are answered, TurboTax can handle your tax return.

Today, we explore some important tax implications of divorce – and how to deal with them:

Property Settlements

(PrimeImageMedia.com)

Property settlement is likely to be the thorniest tax issue surrounding an upcoming divorce. The actual decisions regarding who gets what is not the tricky part – usually, each ex takes what the other one does not want, and what’s left of the couple’s total net worth gets split according to boilerplate ratios like 50/50 or 60/40. What makes property settlements a pain are the tax ramifications. Some assets (like a mortgage) involve tax liabilities or benefits while others involve none. Without special care, you could inadvertently agree to take something that sacks you with a gigantic tax bill.

To avoid these hassles, use the SmartMoney property settlement calculator which computes not just the fair market value of the possessions involved, but also the tax bill and the after-tax value of each item.

Child Support Payments

(banjo d)

Contrary to what some divorced couples believe, child support payments are not deductible on your personal income tax return. This strikes many as unfair, since one could argue that the receiving parent is benefiting from unearned “income” in the amount of the payments. That said, do not attempt to deduct child support payments or deduct them under a different name (such as “family support”) as this is guaranteed to be rejected by any IRS employee who spots it.

Since child support is not tax deductible, your only choice is to pay it for as long as your decree states. Consult your decree if you are unsure of when or under what circumstances your child support obligations end.

Child Exemptions

(bobby-james)

Another pressing tax issue stemming from divorce (assuming you have children) is who gets tax benefits and exemptions pertaining to the kids. In a February 2010 article, SmartMoney notes that these exemptions ($3,650 per child in 2009 and 2010) generally go to the parent who wins custody of the children. Alternatively, parents can agree amongst themselves to override this rule and let the spouse of their choosing claim the exemptions instead. Nor will letting your ex take the child’s exemption prohibit you from claiming head of household filing status (more on that later.)

If your divorce was especially bitter, and your ex is the custodial parent, it is unlikely that they will agree to turn these exemptions over to you. In a more civil divorce, it is certainly a possibility. Just make sure that whomever claims the exemption files a copy of Form 8332 (Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent) each year. The custodial parent must also sign this form no matter what.

Alimony/Spousal Support

(JMRosenfeld)

Alimony (spousal support) payments have unique tax considerations of their own. According to Lawyers.com, alimony payments are tax deductible for the ex who is paying them. If you are getting any clever ideas about disguising property settlement or child support money as alimony (and trying to deduct it) think again:

“If alimony appears to be “front-loaded,” which means that there was a concentrated payment within a very short period of time after the divorce, the IRS may consider the money to be property settlement funds (which are not deductible). Additionally, if alimony ends within six months of a child’s 18th or 21st birthday, this may trigger an investigation by the IRS to determine if the alimony is, in reality, disguised child support.”

To avoid doing this either intentionally or accidentally, consult an accountant regarding the amount and dispersal of any alimony payments you intend to make. Both spouses must also file separate tax returns as a prerequisite to alimony arrangements.

Head of Household Status

(pnwra)

Which ex gets to claim head of household filing status on their income tax return is another contentious divorce-related tax issue. Heads of households, SmartMoney points out, are “entitled to more generous tax brackets and a bigger standard deduction.” Moreover, “various other tax rules are much more favorable for HOH filers than for singles.”

In order for the IRS to consider you “head of household,” you need to file your own separate tax return. Furthermore, you and your spouse cannot have lived together at any time during the last 6 months of the tax year in question. You also must have a “qualifying child” who lived with you for more than six months of the year even if this child can be claimed as a dependent on your spouse’s tax return. Letting TurboTax ask the right questions will help you determine the best filing status for you.