In my practice, I frequently confront the question of filing tax returns during a pending divorce, whether they should file an individual or joint return and what they should do with the refund. The other issue is whether the parties should file an individual or joint return.
Filing tax returns during a pending divorce depends on the situation. First, in the vast majority of divorces, there are restraining orders prohibiting the parties from disposing of assets and possibly even filing tax returns in the absence of a court order or mutual agreement. Therefore, going off on one’s own, filing an individual tax return and keeping the refund could be grounds for contempt.
What is separate property in divorce? It is property that the spouse gets to keep without it being subject to an equitable division by the divorce court.
First, we should look at what is marital property under Ohio law. The Ohio law defining marital property is found in Ohio Revised Code 3105.171 (R.C. 3105.171
). Marital property is:
- All property currently owned by either or both parties or acquired by either or both of the parties during the marriage; and
- All property interest that either or both parties currently holds acquired by either or both of the spouses during the marriage;
- Active income, which is all income and appreciation on separate property, due to the labor, monetary, or in-kind contribution of either or both of the spouses that occurred during the marriage;
- Anything that is not separate property.
When does spousal support end? Even when spousal support is determined as lifetime spousal support, it is not necessarily forever.
There are four ways in which an order for spousal support may terminate:
- Spousal support may terminate on a specified date;
- Spousal support may terminate upon the occurrence of a specified event;
- The domestic relations court may terminate spousal support pursuant to its continuing jurisdiction if a change of circumstances has occurred that supports termination of spousal support;
- Spousal support may terminate as a matter of law upon remarriage of the recipient spouse or the death of either party.
What does the IRS consider to be spousal support? A divorce decree labels payments as spousal support, maintenance, or alimony. Does that mean that the payments are considered to be alimony by the IRS? Not necessarily. Why does this matter? It matters because qualifying spousal alimony payments are deductible by the payer and included in the recipient’s income.
In Ohio, alimony is called spousal support. For purposes of this article, we will use the Ohio term. In order for a payment to qualify as spousal support by the IRS, all of the following requirements must be met: (more…)