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The Tax Consequences of Separation or Dissolution of A Marriage

Informal Separation
Informal separation occurs when either or both parents leave their primary residence to live permanently at another location. There is no exact legal test to determine when a separation has occurred, but IRS regulations favor an approach that the intent of the person leaving the former residence is the decisive factor. Specifically, whether the person leaving intends to permanently leave the former residence and never return. Any parent that leaves a residence without the intent of returning begins a six month tolling provision that prevents married couples (even if they are still legally married) from filing jointly if they are living apart. Note, the IRS has no investigation procedures to count six month duration outside of an audit, thus many couples continue to file as married filing jointly even though they may not qualify under the IRS’ rules.   

Formal Separation
Unlike informal separations, formal separations are created by court order after a petition for separation is filed with the local county family court. Legal separation has significant consequences for the division of a married couple’s property at the state level, but may have little to no impact for federal income tax. The IRS makes no determination of a person’s filing status (e.g. single, head-of-household, married filing jointly or married filing separately) without relying on applicable state law.
 Colorado, like the majority of states, does not classify a legal separation as a formal termination of a valid marriage. As a result, the IRS treats legally separated couples in the same manner as informally separated couples (a couple that lives separately for more than six months and do not intend to return to a common residence are classified as single or head-of-household). Again, like informal separation, IRS has no investigation procedures to count six month duration outside of an audit, thus many couples continue to file as married filing jointly even though they may not qualify under the IRS’ rules.   

Divorces/Dissolution of Marriage    

Unlike separations, when a divorce decree becomes final a marriage is ended and couple generally cannot file as married. However, the same rules of a legal separation may allow a divorced couple for file a final joint return if the couple has not lived separately for more than six months prior to the final divorce decree.



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