My wife and I divorcing. Most income & tax payments come from her. We used to carry over refund as credit towards next year. How would I shift it to my wife's upon split

[dbekkerman]

I am primary on return but income most from her. I could cash out the refund but since she is Self-Empl and I did not compensate for cashout, she may be facing an underpayment penalty if the refund next year carryover is not applied.  Is there a way to tell IRS to apply credit to her part ?

[NCperson]

@dbekkerman what filing status are you assuming you are using for 2022?  Is the divorce expected to be finalized by Dec 31, 2022?  If there is going to be an estimated payment on Sept 15 (and Jan 15) who is going to be making it? 

[dbekkerman]

Thank you for the response 🙂

We not yet file for divorce so in 2022 would be Married Filling Jointly. My wife would be making 1040-ES for Q3 and Q4 but my question in technicality of either how to make TT to "shift" tax payments or do I have to mail the return to IRS and attach an explanation? What I want is the software or IRS to use entire carry over in her name instead of mine.

Thank you

[NCperson]

@dbekkerman - I guess I do not understand your dilemma. If you are filing "joint" in 2022, then all 4 payments would just be posted on your joint tax return.  Regardless of who makes out the payment - you or your spouse - they are applied to the same joint return.  

Are you thinking that because you are listed as 'primary' somehow that affects things - it doesn't because it is a joint return.

[dmertz]

A refund applied to the following year is treated as a Q1 estimated tax payment for the following year.  If you were instead to file separately for 2022, you can split your joint estimated tax payments any way you choose, or, if you can't agree, you would split it proportionately with respect to your combined tax liabilities.  Your question suggests that you want all of the credit should go to your spouse, so your spouse would simply claim all of it.  You would want to address this in your separation agreement so that there were no questions come tax-filing time.  See "Joint estimated tax payments" in IRS Pub 504 for additional details:

https://www.irs.gov/publications/p504#en_US_2021_publink1000175830

Of course if you file jointly for 2022, don't apply any refund to 2023 and you can each make your own estimated tax payments for 2023.  In the separation agreement you would just want to indicate who would get the cash from a 2022 refund or pay a 2022 balance due.

[Opus 17]

Remember you must file according to your status on December 31, 2022.  If you are divorced on that date, you must file single or head of household, even if you were married for most of the year.

Also, if you are still married on 12/31/22 but the divorce is final in 2023, be aware that the refund will go to the designated bank account.  If that account is joint, and closed, the IRS will send a check in both your names that you probably will have great difficulty  in cashing or depositing.  You can include a form to split your refund between 2 bank accounts, if you have set up separate individual accounts by that time.   Exactly how to split the refund should be part of your negotiations about division of money and property, you may want to consult a tax professional or your attorneys.

Lastly, you have the option now of changing your W-4 job withholding so you get more money in your paycheck and then owe tax with your return.  Then you would negotiate how to pay the tax rather than negotiation how to split a refund.