A few decades ago, almost all married couples combined their incomes into joint accounts. Since most households only had one earner, it just made sense. Today, a lot has changed, and only three-quarters of married couples combine finances. Now that there’s more than one way of doing things, it can be hard to determine which option might be best for you and your spouse. Combining finances is the traditional way of doing things for a reason: It’s streamlined. With a joint account, it’s simpler to budget, save, and reduce debt. If one partner makes significantly more than the other, it also puts both people on even financial footing. S hould C ouples C ombine T heir F inances ? T H E P R O S A N D C O N S
But problems do arise. In some cases, the higher-earning spouse may feel taken advantage of, and someone who is previously used to managing their own money can bristle under new spending restrictions. Furthermore, if one person spends money foolishly, they’re spending it for both parties. And if the couple splits, separating assets becomes tricky. That’s why keeping finances separate is increasingly popular, especially as couples settle down later in life with established careers and salaries. This method provides more independence for each person in the relationship and generally results in fewer disagreements regarding disposable income. It also provides protection if someone’s partner makes a big financial mistake. But despite all of the potential upsides, keeping finances separate can actually create the need for more conversations about money. First, couples should decide who is responsible for what. Disagreements can arise when determining how to split the bills, and getting both shares put against one payment
can be annoying. Plus, money arguments aren’t eliminated — couples with separate finances can still face problems when one person always pays their part of the bills late or buys something frivolous instead of saving for a joint purchase. Some couples try to have the best of both worlds by opening joint and individual checking accounts. In the end, the only “right” way to handle money as a couple is the way that works best for your relationship. But no matter what method you choose, managing money together will require trust, difficult conversations, clear communication, and transparent expectations. Getting on the same page can save you from future problems — in both your relationship and your bank account.
Many people can have misconceptions about their filing status. Some think that they can choose their filing status for taxes, but this is not necessarily the case. The filing statuses you should select depend entirely upon when your divorce was completed. If you complete your divorce on or before the last day of the tax year, you cannot file a joint tax return. If your divorce is finalized after the new year begins, the IRS will still recognize you as married and will allow you to file a joint return for the previous year. You can still file separately in the latter situation, but in most cases filing a joint tax return will allow you to utilize the tax breaks usually reserved for married couples. It’s important that you figure out what is the best option for your financial interests. In some cases, filing separately will net you more in your returns. Every situation is different. If children are involved and you are filing separately for the first time, you may be wondering who can claim them as dependents. Whoever the child lives with for the majority of the year is the custodial parent and they can claim the child as their dependent. If you are not the custodial parent, you cannot claim the child as a dependent nor can you claim the earned income tax credit. This is typically the case unless your divorce paperwork states otherwise. We recommend seeking guidance from a tax professional to properly help you through this process. F I L I N G Y O U R T A X E S A F T E R A D I V O R C E
April is tax season and you’re probably preparing to file your taxes if you haven’t already. If you are currently going through a divorce or are recently divorced, then taxes might not be the first thing on your mind. But that doesn’t mean you can ignore them. If you’re unsure where to begin or even what your filing status is, here’s some useful information that will help get you started.
Unfortunately, life does not stand still when you’re going through a divorce, which means you still need to file your taxes. With the information above, you should have a better idea of where to start.
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