Divorce opened my eyes to many things I had never really thought about before. Among them, thong underwear, generic spring water, and one of the biggies... taxes. Unfortunately, there is a downside to receiving alimony, it is considered taxable income.
My first tax season as a newly divorced, independent woman was a real eye opener.
I decided to forge ahead in this new territory and try Turbo Tax. It comes with step by step instructions on how to file your taxes. I began filling in the categories. I have three children living at home so that should help. Oops -- nope they are all over 18, legal adults, basically squatters. No break there, unless I want to file as a homeless shelter. Oh now here's something, donations. This year I gave Goodwill a large amount of purple Ed Hardy slip on tennis shoes and two shawls from Anthropologie after my daughter M said, "Omg. Mom. Please. Who wears a shawl? Who even says shawl?" I give myself $400.00 for that. Okay, maybe this won't be so bad.
Next, home office expenses... went through a lot of paper and ink cartridges this year with my daughter H printing off pictures of herself at various concerts and closeups of her dogs' nose. All rightey, let's just get the total owed here and we should be good.
Ten minutes later I am still in front of the computer, slack jawed, and eyes glazed over. The final number has a lot of zeros. A lot. I think it is in the bizillion range.
In any case I have learned valuable lessons from this experience, and I would like to pass them on to you.
Taxes 101 for the Newly Divorced
1. First off, if there are children involved, make sure it is clear whether you or your ex
will be claiming them on tax returns. FYI, when it comes to taxes, these kids are the
golden tickets. Who says you can't put a price on all that nurturing and loving?
2. Get professional help. Employ the help of an expert whether it be an accountant or
a company like H and R Block. At least for the first tax year or two, let someone lay
the ground work for you until you get the hang of it. After that time, you may be able
to do it yourself with the help of a program like Turbo Tax.
3. Take 20% out of each alimony check and stick it in a tax account. Erase this account from your memory until payments are due. I know it seems like a lot and will necessitate a downgrade from private Pilates to group classes but it has to be done. Yes, I agree, it is gross wiping down your own reformer. Look at it this way, there's probably only one reformer in the whole prison, where you will eventually end up for tax evasion.
4. Set up quarterly payments. Typically these will be due April, July, October and January. As hard as it may be, make these payments. These are voluntary, however, it's easier to part with large sums of money a few times a year, then try to explain to an IRS representative on April 15, you are newly divorced and this is the first you've heard of owing taxes. She will ask you to sell property, borrow the money from family, or put it on a credit card. She is not fucking around.
5. If for some reason, you find that you forgot to do the above and can't pay the full amount owed for the year, depending on how much you owe, the IRS may work out an installment plan with you. However, keep in mind, interest and penalties will continue to accrue and it will be really tough to get ahead of this thing. Do not even think about dying before you pay off your entire debt. That is not an acceptable reason to miss a payment.
Divorce gives us many new challenges and an open road to a new life. Take charge of all aspects of this new life, including physical, emotional and financial responsibilities. That Micheal Kors purse may be calling your name today, but trust me: you don't want the IRS knocking on your door tomorrow.