@rikuseki wrote:
Thank you so much for you help. Here is my worry.
if I file separate and the divorce date is Dec 31st 2021 will I have to pay taxes as single for this whole year? My purpose of filing jointly was so I didn’t get screwed in my taxes. Right now my form is married with dependanrts so they don’t take out much in taxes. If I were to say single the whole year it would mean I would owe over 10k in taxes. I guess my question is what do I put so I don’t get destroyed in my taxes
Yes, your filing status is determined as of Dec 31. If your divorce is final on or before Dec 31, 2021, then you will file your 2021 tax return as single, as if you were single the entire year.
If you are not divorced yet, you have some ability to negotiate with your spouse and your attorneys to consider the best date to make the divorce official. However, be aware that your spouse does not have to consent to filing jointly. If you are still legally married on December 31, 2021, and your spouse does not consent to filing jointly, then you must file as married filing separately, which is usually worse than filing single. You may want to engage competent tax advice before setting the date.
Regarding the 401(k) distribution, your attorneys need to prepare a Qualified Domestic Relations Order (QDRO) that transfers part of your 401(k) assets to your spouse. Once the assets are transferred, your spouse is responsible for all the taxes. They will have the option of rolling over the assets to an IRA, or into their own qualified workplace plan and leaving them for retirement, or they can cash out and pay the taxes. DO NOT withdraw the money yourself. That would be a fully taxable distribution to you followed by a tax-free gift to your spouse. Under a QDRO, your ex will be responsible for any taxes depending on what they do with the money.
