Printer Friendly

Roses, Candy and Taxes: H&R Block Shares Tax Effects of Marriage, Divorce.

Life Changes Can Have Major Tax and Financial Implications

KANSAS CITY, Mo. -- Whether you're tying the knot or severing the tie, Valentine's Day is a natural time to examine the tax implications of marriage and divorce. H&R Block offers these tax tips if you're considering one of these life changes.

More than just wedding gifts and thank you notes, marriage also means planning for a joint financial future, including how the couple's tax situation has changed:

* Marriage means choices. The IRS allows married couples to file using the "married filing jointly" or "married filing separately" status. Each has advantages that can be difficult to sort out. For example, if you claim medical expenses or other itemized deductions that are limited by your adjusted gross income, filing separately may be the way to go. But if you want to claim most tax credits or deduct your IRA contribution, you'll probably need to file jointly. Consult your tax professional to determine the right choice for your first time filing together.

* Social Security numbers don't change, but anyone who has changed their last name will need to apply for a new Social Security card. If the name and number don't match, the IRS might delay processing of the return, which means a refund could take longer than usual to arrive.

* Marriage also means adjusting retirement savings. Besides changing filing status on an employer's 401(k) account, newly married taxpayers also should consider increased limits for tax-deductible IRA contributions. If the couple's income meets certain limits, they could qualify for more of a deduction. In some scenarios, one spouse also may "borrow" from the other's earnings to meet the limits.

* Inform the IRS of a new address. If the IRS does not have the correct address on file for a newly married couple, it could take longer for a refund to arrive. Taxpayers shouldn't count on mail to be automatically forwarded and should consider filing Form 8822 to inform the IRS.

Divorce also can change a taxpayer's financial situation. The best advice is to understand the divorce agreement and its terms, especially key components that could complicate a tax return.

* Alimony is taxable and deductible. The person who provides alimony can claim the payments as a deduction, while the person who receives it can avoid a large end-of-year tax bill by paying estimated taxes during the year. Unlike alimony, child support is not deductible or taxable.

* Who claims children? The parent who has custody of a child usually can claim the child as a dependent. However, with the custodial parent's consent, the parent without custody can claim the child. (The custodial parent may still be able to claim certain tax benefits related to the child, including head of household filing status, the Earned Income Tax Credit, and the child-care credit.)

* Who is a head of household? There are several factors for determining the head of a household. A few include being considered "unmarried" on the last day of the year, having children or other dependents who live with you, and paying more than half the cost of providing a home for dependents. Taxpayers should consult with a tax professional to determine if they qualify for head-of-household status.

* Divorce, annulment and legal separation are considered the same by the IRS for tax purposes. The way a tax return is affected by the situation depends on how the decree is worded, and in cases where state and federal law differ, the IRS will side with the federal government.

Visit www.hrblock.com or call 1-800-HRBLOCK for more information on how marriage, divorce and other life changes can affect taxpayers' financial situations.

About H&R Block

H&R Block Inc. (NYSE: HRB) is a leading provider of tax, financial, mortgage, accounting and business consulting services and products. H&R Block is the world's largest tax services provider, having prepared more than 400 million tax returns since 1955. The company and its subsidiaries generated revenues of $4.9 billion and net income of $490 million in fiscal year 2006. The company operates in four principal business segments: Tax Services (income tax preparation and advice via in-office, online and software solutions); Mortgage Services (non-prime mortgage originations and loan servicing); Business Services (tax, accounting and consulting services for midsized businesses); and Consumer Financial Services (investment and financial advisory services, retail mortgage loans and banking services). Headquartered in Kansas City, Mo., H&R Block markets its services and products under three leading brands -- H&R Block, Option One and RSM McGladrey. For more information, visit our Online Press Center at www.hrblock.com/presscenter.
COPYRIGHT 2007 Business Wire
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2007, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Publication:Business Wire
Date:Feb 13, 2007
Words:764
Previous Article:Roamware Technology Proven in New GSM Association Global Roaming Initiative.
Next Article:Fairchild Semiconductor's 200V/250V PowerTrench(R) MOSFETs Offer Industry-Leading Efficiency and Space Savings in Plasma Display Panels.
Topics:


Related Articles
Sale of the marital residence in a divorce context.
Talking California Tax.
New ruling for stock options in divorce. (Stock Options).
My big fat GOP wedding: Bush administration marriage grants seek to wed church and state in unholy matrimony.
Lesbians' divorce again attacks Canadian law.
The impact of family structure and family change on child outcomes: a personal reading of the research literature.
Limits on rulings on NQSOs in divorce.

Terms of use | Privacy policy | Copyright © 2018 Farlex, Inc. | Feedback | For webmasters