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Posts Tagged ‘Filing Status’

Are You and Injured Spouse – Using IRS From 8379

Are you an Injured Spouse?

You are considered to be an injured spouse if you file a joint return and your overpayment of taxes (tax refund) is expected or has been applied (offset) against your spouse’s share of past due federal income tax, student loan, child support, alimony (spousal support), or state income tax. This is different from claiming the innocent spouse relief which will be covered in a separate article.

For example, Spouse A and B file a joint return and have a potential federal tax refund of $ 1,000. Spouse A had been previously married and had an outstanding past due federal tax debt of $2,000 prior to marrying Spouse B. The IRS can offset the past due balance with the potential refund by applying the $1,000 against the $2,000 past due amount. Let’s assume Spouse B’s portion of the refund amounts to 60%. Spouse B could claim Injured Spouse relief (if they meet the requirements below) by filing IRS Form 8379. Spouse B would be entitled to a $600 ($1,000 x 60%) refund and Spouse A would have $400 ($1,000 x 40%) applied against the $2,000 past due federal income tax.

How Do you Qualify for Injured Spouse Relief?

In the example above, Spouse B, could qualify for injured spouse relief, if they meet the following requirements:

  • Spouse B is not required to pay the past due amount (Federal Income Taxes)
  • Spouse B reported earned income (wages, taxable interest, etc..) on the joint return
  • Spouse B made federal tax payments (tax withholding / estimated tax payments), or claimed refundable credits (i.e earned income credit)
You will need to complete IRS Form 8379 (Injured Spouse Allocation) in order to claim your relief.

For more advice related to determining your injured spouse allocation or innocent spouse relief, please download our ebook:

Child Dependent Exemption Tax Deduction and Divorce

The Internal Revenue Service amended the tax code related to the Child Dependency Exemption Deduction a couple of years ago. Being able to claim the exemption for your dependent child has many significant tax advantages to the parent claiming the exemption. It is important to understand the summarized rule changes below, so as to not jeopardize your position if you are the parent entitled to claim this valuable exemption.

The changes to the tax code can be summarized as follows:

  1. The custodial parent is the parent with whom the child resides the greater number of nights during the year. The non-custodial parent is the parent with whom the child lived with the minority (less than 50%) part of the year. This definition will be used for tax purposes regardless of what the divorce decree may state.
  2. You must obtain IRS Form 8332 (Release of Claim to Exemption for Child of Divorce or Divorced Parents) to claim the exemption if you are the non-custodial parent. A divorce agreement or court order can no longer be used to substitute for IRS Form 8332.

If you able to claim your child as a “qualifying child” for the dependency exemption, you may be eligible for the following tax benefits:

  • Dependent Exemption Deduction
  • Child Tax Credit
  • Child and Dependent Care Credit
  • Education Credit (Hope and Lifetime Learning) or Education Expense Deductions
  • Earned Income Credit
  • Head of Household Filing Status

Whether you can take advantage of these credits and the amount of the credits varies depending upon your financial situation. For example, some of these credits phase out at higher income levels making them more valuable to low and middle income filers.

The tax benefits of being able to claim your child for the Dependent Exemption can be financially advantageous from a tax standpoint and could put thousands of dollars into your bank account every year. You will want to understand the impact of the financial / tax advantages or disadvantages prior to finalizing your divorce.

For more advice related to determining the child dependent exemption, please download our ebook: