Got Divorced - Tax Questions

[401Killer]

Now that I'm single guy again, I paid married people taxes for the last 8 months. I learned that when you file, you file based on your marital status on Dec 31st. So if you say you are single, you basically pay/owe taxes for 2016 at a single person's rate for the entire year. This could result in a hefty tax bill come filing time.

Is that correct?

For a while I just assumed you paid taxes at the rate you are at the time. Meaning, I would pay married people tax rates for 8 months, then 4 months at single guy rates for the rest of the year. But it appears to be not the case. I will have to pay taxes for the full year as a single person.

So what I've done to try and reduce/remove owing at come filing time, I am set at single 0, and am paying another $50 extra on my 2 week paychecks.

[CareCPA]

Correct. Your tax bill is based on your filing status as of the last day of the tax year.

[401Killer]

Crap...

I may have to raise it up to $100 extra, and bump my 401k up to like 30% to help defer my income... Be nice to know exactly how much I'll need...

[CareCPA]

If your income is predictable, you should be able to run it through the 2015 form (to get close since I don't think 2016 forms are out yet. If they are, use those). You can then see what your year-to-date withholdings are on your paychecks, and what your withholding is for the next 4 months based on your current w-4 status. This should give you an idea of whether you'll be underpaid or overpaid come the end of the year.

[seattlecyclone]

Are you in a community property state? If so, any wages you or your ex earned while still married are counted as belonging half to you and half to them. That may ease the bite a bit if you were the higher earner. Might want to talk to an expert in your state to see if there are any other things to be aware of.

[401Killer]

hmm, just looked at my pay stub past for the last couple of years. I can look at my total federal taxed amount when I was single before the marriage and use that as a rough estimate of what I'll need to have paid for 2016. Would that be a decent rough way to tell?

Also, does the social sec amount change at all when married/single? I don't expect it to.

[CareCPA]

Are you in a community property state? If so, any wages you or your ex earned while still married are counted as belonging half to you and half to them. That may ease the bite a bit if you were the higher earner. Might want to talk to an expert in your state to see if there are any other things to be aware of.

Even for Federal Income tax purposes? I did not realize that.
I should note the standard caveat that I'm speaking from PA tax rules. Seattlecyclone makes a good point that you should consult with someone in your state for specific information.

[401Killer]

Are you in a community property state? If so, any wages you or your ex earned while still married are counted as belonging half to you and half to them. That may ease the bite a bit if you were the higher earner. Might want to talk to an expert in your state to see if there are any other things to be aware of.

I was a much higher earner than she was. I'm in Michigan.

Maybe make a H&R Block Appt.

[seattlecyclone]

Are you in a community property state? If so, any wages you or your ex earned while still married are counted as belonging half to you and half to them. That may ease the bite a bit if you were the higher earner. Might want to talk to an expert in your state to see if there are any other things to be aware of.

Even for Federal Income tax purposes? I did not realize that.
I should note the standard caveat that I'm speaking from PA tax rules. Seattlecyclone makes a good point that you should consult with someone in your state for specific information.

Yes, the federal government does observe state community property rules. Just as an example, this added some complexity for gay couples before the federal government recognized their relationships. They had to file as single for the federal government, but because the state government recognized their marriage and applied community property rules accordingly, they had to report half of their own W-2 and spouse's W-2 earnings on each tax return.

[dandarc]

Are you in a community property state? If so, any wages you or your ex earned while still married are counted as belonging half to you and half to them. That may ease the bite a bit if you were the higher earner. Might want to talk to an expert in your state to see if there are any other things to be aware of.

Even for Federal Income tax purposes? I did not realize that.
I should note the standard caveat that I'm speaking from PA tax rules. Seattlecyclone makes a good point that you should consult with someone in your state for specific information.

Yes, the federal government does observe state community property rules. Just as an example, this added some complexity for gay couples before the federal government recognized their relationships. They had to file as single for the federal government, but because the state government recognized their marriage and applied community property rules accordingly, they had to report half of their own W-2 and spouse's W-2 earnings on each tax return.

Added complexity, but potentially coming out ahead on taxes, right?  This is how everyone who is quick to recommend "filing separately" as a way to deal with a marriage-penalty situation thinks it works - for a small set, it actually did work that way for a while is what you're saying, right?

[dandarc]

Actually no, not at all on being "Married filing separately but better".  Don't know why I try to do or say anything when I feel like this.

More like "Married filing jointly but better for high-income folks".

[CareCPA]

Are you in a community property state? If so, any wages you or your ex earned while still married are counted as belonging half to you and half to them. That may ease the bite a bit if you were the higher earner. Might want to talk to an expert in your state to see if there are any other things to be aware of.

Even for Federal Income tax purposes? I did not realize that.
I should note the standard caveat that I'm speaking from PA tax rules. Seattlecyclone makes a good point that you should consult with someone in your state for specific information.

Yes, the federal government does observe state community property rules. Just as an example, this added some complexity for gay couples before the federal government recognized their relationships. They had to file as single for the federal government, but because the state government recognized their marriage and applied community property rules accordingly, they had to report half of their own W-2 and spouse's W-2 earnings on each tax return.

That's really interesting, thanks for the information. I haven't done personal taxes for any community property states, so I'll bank that knowledge for the future.

401Killer: I'm biased, but I would not go to H&R Block unless you happen to know that they are very competent in your area. A lot of those training programs are not geared toward out-of-the-ordinary events or accurate tax projections. I always advise towards a CPA (but that's probably because of my profession). Just my $0.02.

[DavidAnnArbor]

Yes I would agree with Frugal, that a CPA is your best bet, over HR Block. HR Block charges a lot of money, and I've seen mistakes on tax returns that they do. There are lots of good independent CPA's in Michigan.

[Eric222]

I went through this situation, but in a different state.  I had a CPA start handling my taxes that year - totally worth it. 

*My ex and I also have kids together and were getting divorced but weren't divorced on the first Dec 31st after separation, both of which made it even more bizarre and complicated.