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Federal tax considerations after a 2011 divorce or separation

New York residents take note; the last day of any year is the most significant for tax filing status. The married or unmarried state of an individual on December 31 determines how a taxpayer files with the Internal Revenue Service.

It does not matter to federal tax officials whether a person's divorce decree is issued at the beginning or end of a year. For IRS purposes, the marriage or divorce status of an individual on the year's final day counts as the person's filing status for the entire tax year.

A person who was divorced any time in 2011 may no longer file as a married person. Filing status for an unmarried individual is either single or head of household, depending on tax qualifications. An individual who was married or separated from a spouse last year has the option of filing separately or jointly with a spouse, but must still file as a married person.

Divorce settlements usually include an ex-spousal tax plan for child exemptions, but what happens if a couple is in the throes of divorce and no agreement has been reached? An exemption for a dependent most often may be claimed by the parent with whom a child resides most of the year. Custodial parents normally qualify for dependent claims, unless a court-order or couple's written agreement dictates otherwise.

The same child may not be claimed by both parents during the same tax year. A custodial parent may give written permission for a non-custodial parent to claim a child as a dependent, although doing so could prevent the primary custodian from claiming other generous, child-related tax benefits.

The IRS sees alimony as income for the recipient and a deductible expense for the ex-spouse who pays spousal support. Qualified payors may deduct alimony from a tax bill. Support recipients receive alimony as income, which makes the support payment taxable.

Tax experts caution that the amount of alimony received must match the amount deducted by the payor or the IRS may flag both tax returns for an audit.

Child support tax laws are opposite. A non-custodial parent who pays support for children may not deduct the payments from federal taxes. Child support is not income in the eyes of the federal government, which makes the support non-taxable to a custodial parent.

Source: The Huffington Post, "5 Money Questions To Ask Before The Year And Your Marriage Come To A Close," Gabrielle Clemens, Jan. 6, 2012

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