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Annulment versus divorce matters at tax time

documents photoIn our last post, we discussed how divorce affects an estate plan. A thorough review of all estate documents is critical post-divorce to ensure you’ve covered every conceivable scenario and changed every document necessary. Allowing an attorney to do that review for you is always in your best interest, as attorneys have a keen eye for details and wording that may escape even a close reader who does not have legal training.

Taking this matter one step backwards, though, we’re examining annulment versus divorce in this post. While both lead to the same conclusion – you’re no longer married – these two scenarios have very different consequences when it comes time to pay taxes.

Both parties may file as married at tax time if they were still legally married at the end of the calendar year. Options include filing a joint tax return, as many married couples do, or checking the married but filing separately box.

An annulment, though, means you were never married in the eyes of the Internal Revenue Service. It is as if the marriage never existed. So you may not file as married, and neither may your spouse or ex-spouse. In fact, if you sought an annulment after filing, you’ll be required by the IRS to go back and file amended returns.

You may have what you or your spouse feels are sound reasons for wanting to get a marriage annulled, but be aware, you could be creating major headaches if your taxes are particularly complicated.

The IRS addressed this very issue nearly 40 years ago in a 1976 ruling, which is Revenue Ruling 1976-255. You can read more about it in a 2002 post by the IRS addressing what documentation is necessary to prove a marriage has been dissolved when changing tax status.

Annulments are sometimes used in cases in which marriages are of a very short duration. Famous annulments include Renee Zellweger and Kenny Chesney’s annulment after a four-month marriage in 2005 and Carmen Electra and Dennis Rodman’s annulment following a nine-day marriage in 1998.

When it comes to tax time following a divorce, your status at the end of the year is what matters. If you are still legally married at 11:59 p.m. on December 31, then you’re married at tax time, and you should file accordingly.

You will likely have to come to some kind of agreement with your spouse in terms of who claims dependents on your tax return, and you may need the assistance of your divorce attorney to work through who can claim which dependent.

If you’re filing taxes for the first time post-divorce, we highly recommend working with a tax professional to ensure you are taking all of the deductions you can and that you’re filing forms appropriately. It’s important to be sure you’re following IRS instructions and advice to avoid penalties and audits, which are painful and time-consuming.

If you need the advice of an estate or tax attorney, we are happy to help you. Contact Nathan Vinson, attorney, at English, Lucas, Priest & Owsley, LLP. You can reach Nathan at nvinson@elpolaw.com or (270) 781-6500.