California Family Law Attorney
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May 21, 2010
  What is HEAD OF HOUSEHOLD status for IRS purposes?
Posted By Thurman Arnold

Q. What is the effect of claiming "head of household" status in a tax return?


A. Head of household does not apply to joint tax returns. If you are divorced, or if you are married filing separately, you may be entitled to claim HH status. This is also often referred to as HH/MLA (married living apart). There are important tax advantages to filing HH/MLA. It is not an exemption, but a filing status just like filing "married," "married filing separately," and "single."

To qualify you must be separated from your spouse during the last 6 months of the calendar year and have at least one child living with you for more than 50% of the time. You may well pay less taxes to the IRS if you can claim it.

There is an extremely important piece of knowledge here that many attorneys and most family law judges seem to forget or ignore: In situations where each parent has exactly 50% custody of the children, neither can file HH/MLA. 50-50 custody is a common shorthand way to characterize true joint physical custody arrangements. But to be eligible for this filing status, the custody cannot be exactly the same for each parent; if you presently share custody per a equal custody order, you would do well to modify the order (and even alter slightly your actual custodial timeshare). All you need do to avoid this problem is give one parent 50.1% custody and the other 49.9%, particularly in any orders that are drafted and filed with the Court. Squabbling over these percentages is a waste of time and money - it will not hurt you to be the 49.9% parent.

If there is more than one child, then parents can modify the parenting schedule so that each can claim one in order to maximize each party's tax savings and the support dollars.

Your filing status is important to your spousal and child support rights and obligations. Family Code § 4059(a) requires that child support orders be based upon accurate tax filing assumptions, and the support programs (the Dissomaster, Xspouse) similarly require a status to be selected before a support number can be rendered.

For a payor spouse, the child support will be less if the filing status is Single than it will be if the status is HH/MLA, but if you truly file Single the costs paid to the government will likely exceed any perceived savings on child support. This is because a person has more net disposable income after taxes when they are HH/MLA or even MFS than when they are Single. In the same way, the child support may be less for a parent claiming HH/MLA depending upon their income but if they have little income the HH/MLA may have little or relatively little economic value to them.

This is a good example of how Mediation and/or Collaborative Divorce can be used to benefit separating spouses. Money can be saved for both parties where they structure their dissolution to maximize tax benefits and minimize tax consequences to each - which nobody typically considers or does in the midst of a hostile, contested divorce. The IRS benefits when couples are at war! In a mediated or collaborative dissolution, neutral tax experts can be consulted and used to design agreements that save the higher earning parent money while increasing the cash available to the supported spouse and for children. Would you not rather give money to your kids than to Uncle Sam?

Thurman W. Arnold III


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May 21, 2010
  Must I file a JOINT TAX RETURN if we are not yet divorced?
Posted By Thurman Arnold

Q. My husband and I separated in 2009 but we are not divorced yet. We are on extension because he wanted me to sign a joint tax return with him, but I am nervous about doing it and keep stalling. He says if I don't sign he will ask the judge to make me. He has his own business and I suspect he is not reporting all his income. Am I required to file jointly and what happens if I do?


A. If you remain married as of December 31 of any year, you may - but you not required to - file jointly with your husband. It does not matter that you were separated during the tax year as long as your marital status has not been terminated, for instance by a Bifurcation application. You cannot be forced to file jointly, and no judge would order that you do so. Married people who are considering not filing jointly, however, should avoid signing the joint Form 4868 for the automatic extensions; depending upon other circumstances, the IRS might deem this is a consent to a joint return.

The chief problem with filing joint tax returns is that each spouse is "jointly and severally" liable for one hundred percent of any taxes due on either and both parties' income, and interest and penalties as well. If you suspect your husband is defrauding the IRS you are ill advised to file with him. Another problem is that absent an agreement otherwise, tax liabilities incurred between the date of marriage and the date of separation are community property debts, regardless which of you generated the income upon which the taxes are based. If it is not clear that you do not intend to take on any share of the liability, particularly the portion incurred after separation, by signing jointly an argument can be made you should be responsible for one-half of the full-amount. It is best to define your understanding in a writing signed and dated by both of you.

If you do file jointly anyway, at a minimum consider first getting him to sign an indemnification agreement; if there is a court proceeding pending between you, this should be in the form of a Stipulation and Order that is filed with the Court. You want a judge's signature on the agreement because agreements have to be converted into orders or judgments anyway to be later enforced if one party breaches their promises.

Indemnification agreements are only as good as the availability of a meaningful remedy, and they apply only as between the parties and do not bind the IRS or anyone else. Even if your husband promises to pay all the taxes, interest, and penalties, and even if his promise becomes a court order, as a practical matter if he later lacks the ability to meet his obligation (or refuses to do so) you may wind up with a money judgment against him that you cannot collect.

But there can be good reasons to file jointly, and it is much less a problem where your spouse is trustworthy. Taxes are usually but not always lower, and to the extent he paid you spousal support in 2009 if you file jointly you will not be charged with that as taxable income; but nor will he get to claim the spousal deduction.

The issue of joint returns is something divorcing couples often barter over. You ought to have clear ideas of the pros and cons for you in your particular situation. If you are reluctant to sign, consider what you might trade for. It may be helpful to know how much money your spouse stands to save if you agree to file jointly, so you can evaluate the value to him of your cooperation.

I urge you to speak to a competent accountant or other tax specialist early on, and before signing an extension request. Most attorneys have a limited understanding of tax rules, and they will usually urge you to consult an expert. You should follow that advice. Unless a lawyer is herself a tax specialist, avoid relying just on an attorney's opinion. Besides, an accountant can examine how you might end up under your other options.

More more blog articles and tax issues in California divorce, visit us here!

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Thurman W. Arnold III

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