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With the April 15th tax deadline approaching, it’s the perfect time to review the basics of filing taxes in Texas, especially if you’re going through a divorce. While Texas doesn’t have a state income tax, you still need to file a federal return based on your income from the previous year. Your filing status—whether single, married, or head of household—can significantly affect your tax obligations after a divorce.
It’s your responsibility to assess whether you owe taxes or qualify for a refund. Depending on your income, deductions, and changes in your marital status, you might not owe anything—or you could be entitled to money back. The only way to know for sure is to carefully calculate your tax liability and file your return accurately.
You can do this in several ways. The old-fashioned way is to find a “1040” worksheet, put pen to paper, and figure out your income, credits, deductions, and anything else that may be relevant to your situation. You can determine your tax obligation or refund in this manner. There are online tax preparation websites that you can use. There are commercial tax preparers seemingly in every strip center in Houston. Finally, you can pay to have a CPA or other tax professionals do your taxes for a fee. Whatever you decide to do, it is the law that you file a tax return by April 15th of each year. This does not mean that you have to pay your tax obligation, if any, by that date. However, you must file a return.
How unfiled taxes can affect your divorce and what to do about it
A situation that one of our experienced family law attorneys with the Law Office of Bryan Fagan just ran into involved a client who had not filed nor paid his income taxes in many years. He had already filed for divorce earlier this year and felt concerned that his failure to pay taxes could negatively impact his case. So, he came to speak to his attorney, who advised him that it would be a great idea to file taxes for any years that he had not already done so. Remember- it’s the law that you must file a tax return each year. His wife had filed her taxes as a married filing separate designation under this scenario. She had been able to file her taxes, but he had not filed.
What our client was left wondering was what to do here. He knew that he had to file taxes sooner rather than later. The last thing he wanted was for the IRS to come down on him as far as having to pay multiple years of taxes, penalties, and everything else. He anticipated some blowback from the IRS as far as penalties and late filing fees, but with some planning, he wanted to avoid the worst of that fate. He had the same plan that a reasonable person may come up with: file your past due tax returns as soon as possible and then pay whatever you need to before the fees rack up any higher.
Meeting with your attorney face-to-face has many benefits
Our attorney took one look at the plan and said he understood where the client was coming from, but that he had a better idea. See, this is where an attorney with the Law Office of Bryan Fagan differs from most other family attorneys in Houston. Most other attorneys would respond via email to a question that you had for him or her. He would fire off an email on the way home or while he was waiting for another hearing to begin inside the courtroom. The lawyer would give the situation a couple of seconds of thought and then make a pronouncement via email that could potentially alter the case and your near-term future, at least financially speaking.
That is not what our attorneys do. We work hard to get results for our clients, and we approach every case with careful thought and individual attention. After coming into our office to meet with his attorney, this client received some well-thought-out and sensible advice about how to proceed, given the tax implications of this decision.
The first reaction any may have to the situation is to immediately file and then pay as much in the way of back taxes as possible. That way, you give yourself time to set up a payment plan, apply for a loan, or take other steps to pay off the remaining tax debt—while keeping the IRS off your back in the meantime. Nobody wants the IRS on their back. This is especially true when you consider that this gentleman owed many years’ worth of back taxes.
How unpaid taxes can be handled through your community property division in divorce
The advice that his attorney provided him was to file the back taxes, but wait on the payment portion. Wouldn’t the fees and penalties for failing to pay after all these years start to be a huge burden, the gentleman wondered. Our attorney acknowledged this as a valid concern but pointed out that a few extra months of fees or penalties after waiting a decade to pay taxes would not make much of a difference. However, what could significantly impact his divorce was the ability to pay that tax debt from the community estate—rather than using his separate funds after the divorce was finalized.
The attorney advised the man to calculate the total tax owed and include it as a line item in the division of his community property estate. He explained that the tax debt should be treated like any other liability in the divorce and paid by one spouse using community funds. Since the income that triggered the tax was part of the community estate, the attorney reasoned, the taxes should be as well. The client agreed, and together they created a plan to file the missing returns, calculate the debt, and include that amount in the final property division—splitting the responsibility fairly between both spouses.
Why timely legal advice during divorce can protect your finances—and your peace of mind
This was extremely important advice at the exact moment in time that the gentleman needed it. This is not a situation that a family law attorney runs into every day. There are tax questions and issues in a divorce, to be sure, but they are usually not ones that are as extreme as this one. With that said, our attorney was happy to be able to give the advice that he did at that moment, right when his client needed the word of wisdom. It potentially saved him thousands of dollars and gave him peace of mind as well. All in all, the client was appreciative and received the right advice at the exact right time.
With any issue having to do with taxes, the Law Office of Bryan Fagan wants you to be aware that nothing in this blog post should be taken as tax advice or counsel. Our attorneys practice family law and are not tax attorneys or tax preparation experts. As a result, we would recommend that you speak with an experienced tax professional before making any decision to file, prepare, or pay taxes. There are tax credit questions that come up in a divorce that you can speak to your attorney about, but specific tax advice would need to be sought elsewhere. We shared this story with you since it illustrates the sort of candid, honest, and well-informed advice that you can receive from an attorney with the Law Office of Bryan Fagan. Please contact us today to schedule a free-of-charge consultation with one of our licensed family law attorneys.
What do you need to know about community property and taxes?
The community property laws of Texas will impact how you figure out your income when you are filing your federal income tax return each year. Whether you live in Texas, your marital status, and how you file—jointly or separately—are all key factors to consider for tax purposes. For example, most married couples pay less in taxes when they file jointly compared to filing separately. Choosing the right filing status can make a significant difference in your overall tax burden.
Know what income to report when filing separately in a community property state like Texas
If you plan to file your tax return separately from your spouse, you must report half of all community income and all of your separate income. Most long-term marriages involve little separate income, if any, so your return will likely reflect mostly community earnings. Community property includes anything you, your spouse, or both acquire during the marriage. If you and your spouse signed a marital or premarital property agreement, property that began as separate may have been converted into community property. This change directly affects how you report both income and assets on your tax return, especially when filing separately.
Community income comes from community property sources. This includes salaries, wages, tips, and any payments earned by you or your spouse during the marriage. If you own real estate classified as community property, any rental or investment income from that property also counts as community income. To correctly classify income, you must review when each asset was acquired. Pinpointing whether property is community or separate is key to reporting the right income on your tax return.
Understand separate property, tax withholdings, and child-related tax claims after divorce
Additionally, both you and your spouse likely own separate properties. The separate property would be a property that you or your spouse owned separately before your marriage. Additionally, you could also acquire separate property during your marriage if the property was a gift to you or inherited by you. You could also have used the separate income to purchase property, and therefore, that property would be properly classified as separate property. Please note that in Texas most income that is earned from separate property is community income.
It is a good idea to update your W-2 form with your employer to claim the proper withholding for tax purposes. You may need to determine whether the spousal maintenance or contractual alimony you received counts as taxable income. If it does, you might also need to file a quarterly tax return.
Whichever parent of your child is the primary conservator would be the parent who can claim their child on their tax return for the child tax credit. If you and your co-parent split custody of your child, then there are ways to determine which parent will be able to claim the credit on their taxes. A family court judge in Texas is not able to issue orders regarding the federal child tax credit.
What about filing taxes as a single adult after your divorce?
Even though it may not feel like it now, your divorce will eventually come to an end. At that point, you will be required to file taxes for the subsequent year. As a result, it would be helpful to learn how to file taxes in a way that is most advantageous for you. The standard deduction is what most of us take unless we take the time to itemize our deductions. As a result, a single person may be able to file as head of household and receive a larger standard deduction than would have been available as filing married filing jointly.
Don’t overlook tax credits and dependent claims after your divorce
The next area where you should place some emphasis as a newly single adult is what you will be able to do as far as filing taxes with your child as a dependent. We have already mentioned how the child tax credit may be something that your child qualifies for on your tax return. This credit was worth $2000 in 2022. Every little bit helps when it comes to paying taxes. You are not going to get out from underneath the burden of your divorce in one fell swoop. Rather, it would be a good idea to take advantage of every money-saving mechanism that comes your way during the divorce. There will not be many of them, but anyway that you can save money, it would be to your advantage.
In any event, you can treat taxes as another financial obligation that you are responsible to take care of both during and after your divorce. It is not enough to simply pay Service to this subject and focus on other areas that interest you more. While taxes are far from the most fascinating subject that you will ever come across, they are still important. While your attorney will do their best to help you maximize your divorce in all areas of your life, there is no telling how the divorce will play out when it comes to taxes unless you pay close attention to the details. Taxes often get complicated, so having a professional guide you through the process is essential for making informed, accurate decisions. You may even be able to find help for free in your area. This is especially true during this time of year.
Make sure to file your return and don’t overlook the child tax credit in your divorce
You can prepare your taxes using software, online platforms, traditional pen and paper, or by working with a qualified tax professional. No matter how you choose to do your taxes, you must file a return, no matter if you plan on paying those taxes this year. Remember what we mentioned at the beginning of today’s blog post: it’s the law that you must file a return each year, but it is not the law that you pay your taxes in full on April 15th. Filing a tax return and not paying your tax bill is better than doing neither.
Another point to make regarding taxes and your divorce is that you should make sure to try and negotiate regarding the child tax credit with your spouse. This is not a huge negotiating point given that the credit is only worth $2000. However, we have already talked about how every dollar helps, and a $2000 credit is far from peanuts. If you do not negotiate on this, a judge cannot issue orders on a federal tax credit. So, be sure not to waste the opportunity in your divorce. You can bring this issue to the IRS, but it’s far easier to address and resolve it during your divorce proceedings.
Conclusion
Understanding the impact of divorce on your tax responsibilities is essential when filing taxes in Texas. Even without a state income tax, federal filing can become complicated by changes in marital status, custody arrangements, and income division. Taking time to review your filing status, deductions, and potential credits can help you avoid costly mistakes and ensure compliance. If you’ve recently divorced or are going through the process, speak with a tax professional to gain clarity and reduce stress while managing this critical financial responsibility.
As always, if you want to be as prepared as you can for your divorce regarding taxes or any other subject, then you should reach out to the attorneys with the Law Office of Bryan Fagan. We pride ourselves on helping people with their divorces in a way that helps them now and in the future.
Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan
If you have any questions about the material contained in today’s blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free-of-charge consultations six days a week in person, over the phone, and via video. These consultations are a great way for you to learn more about the world of Texas family law as well as how your family’s circumstances may be impacted by the filing of a divorce or child custody case.
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- How Taxes and Deductions Affect Child Support Payments in Texas
- Largest Tax Fraud: The Magician Made Taxes Disappeared
- How To Minimize Estate Taxes in Texas
- Children and Taxes Post-Divorce: The Basics
- Property Division & Taxes: The Basics
- How to negotiate a divorce settlement with taxes in mind
- Divorce & Taxes: The 4 (and a few more) Things You Must Know
- Navigating IRAs in Divorce: A Comprehensive Guide on Taxes and Procedures
- Mastering Post-Divorce Taxes: A Guide to Financial Resilience
