As with every other part of your life, separation and divorce impact your taxes. This is an area in which you should try your hardest to keep the lines of communication open and the emotions out. Remember to treat your divorce as a business as it will only benefit Uncle Sam if you file separate tax returns out of spite when filing jointly is beneficial. Do not assume that you will able to claim all deductions and exemptions. That will only lead to fines, penalties, and audits if you are wrong. The IRS does not care about your personal problems or that you and your (ex)spouse are unable to communicate. Make sure that you have all tax related issues settled and clearly stated in your separation agreement and or divorce decree.

How are you going to file your taxes. Determine the best way financially to do this. Normally filing a Married Joint Return will result in the lowest taxes. Do not look at a joint return as any kind of "attachment" to your spouse. This is strictly a financial situation. You qualify for the Married Filing Jointly status if you are not yet divorced. You do not qualify for this status in the tax year you were divorced.

You may claim a child that does not live with you only if it is stated in your divorce or separation agreement or if mutually agreed upon. This does not apply if you and your spouse are filing a Married Joint Return (see above).

Under certain circumstances, the amount of your legal and accounting fees paid which can be attributed to maintaining or preserving income (not child support) may be tax deductible.

If you either pay or receive alimony/maintenance there are tax ramifications. Alimony/maintenance (not child support) is taxable to the recipient and deductible for the payer. Occasionally a dispute will arise as to how much alimony was paid/received. Sometime the IRS will question the alimony amounts. For that reason it is very important to keep good records. If you fail to keep adequate records you may lose the alimony tax deduction.

If you pay alimony you should keep the following records for at least three years:

1. Original checks. Be sure to show on each check the month the payment represents.
2. A list that shows the date, check number, amount and address where payment was sent.
3. If you give cash obtain and retain a receipt signed by both the payer and the recipient.

If you receive alimony you should keep the following for at least three years:

1. A photocopy of the check or money order received.
2. A list that shows the date, check number, amount of payment, bank account the funds are drawn on, account number against which the check is drawn on.
3. A copy signed receipt with signatures of both payer and recipient for any cash payment received.

Is not taxable nor is it deductible.

You may be eligible for the earned income credit (EIC) if:

• You have more than one qualifying child and your earned income was less than $37,783 ($39,783 if married filing jointly),
• You have one qualifying child and your earned income was less than $33,241 ($35,241 if married filing jointly), or
• You do not have a qualifying child and your earned income was less than $12,590 ($14,590 if married filing jointly)

For more information on the Earned Income Credit see IRS Publication 596

If you paid someone to care for your dependent under age 13 or your disabled dependent or spouse so that you could work or look for work, you may be able to claim the Child and Dependent Care Credit on your tax return.

To qualify for the Child and Dependent Care Credit you must:

1. Have paid for care expenses in order to earn taxable income. If you are married both spouses must work either full or part time. Spouses who are full time students or incapacitated are excepted.;
2. Pay more than 50% of the household maintenance costs for a qualifying dependent;
3. File your tax return jointly if married, unless the separation rules apply;
4. Hire someone other than your child (under age 19 at the end of the tax year), your spouse, or a person you can claim as a dependent;
5. Have qualifying expenses over and above any tax free reimbursements from your employer;
6. Report on your tax return the name, address, and taxpayer identification number of the child care provider. If the care provider is a tax exempt organization the taxpayer identification number is not required.

Employment-related expenses that qualify for the Child and Dependent Care Credit include household services and expenses for care of the qualifying individual. Expenses of attending a daytime summer camp qualify for the Child and Dependent Care Credit if that is a reasonable means of providing care during working hours. However, overnight camp expenses do not qualify for the Child and Dependent Care Credit. A nursery school generally qualifies for the Child and Dependent Care Credit, though an elementary school does not qualify for the Child and Dependent Care Credit.

Child and Dependent Care Credits are allowed for $3,000 of expenses for one dependent's care and $6,000 for more than one dependent's care.

In order to claim the Child and Dependent Care Credit you must maintain as your principal home a household for at least one of the following qualifying persons who live with you:

1. A child under 13 years of age whom you claim as a dependent;
2. Your spouse if your spouse is physically or mentally incapable of caring for himself or herself;
3. A person who is physically or mentally incapable of caring for himself or herself regardless of age

For more information on the Child and Dependent Care Credit see IRS Publication 503

If you have children who are under age 17 as of the end of the tax year, you can get a $1,000 tax credit per child on your tax return. A tax credit reduces your tax bill dollar for dollar, so three qualifying children, for example, can cut what you owe Uncle Sam by $3,000. The credit may be limited if your income exceeds a certain level. And the credit does not affect the exemptions you take for dependents. The credit is in addition to your exemptions.

To qualify for the Child Tax Credit you must meet these tests:

1. The dependent must be a U.S. citizen or resident. You can claim your child, stepchild, adopted child, grandchild or great-grandchild. Under a new definition of a "qualified child," you can also claim the credit for siblings, step-siblings and half-siblings that live with you. Foster children qualify if they were placed with you by a court or authorized agency. To claim the credit, children must live with you more than half the year and must not provide more than half of their own support.
2. You must report each qualifying child's tax identification number (TIN) (usually the child's Social Security number) on your return.

For more information on the Child Tax Credit see IRS Publication 972

If your spouse knowingly cheated on your joint return to evade taxes, you might not be held responsible. Effective July 22, 1998 a new tax rule went into effect whereby if you are divorced, legally separated or have been living apart from your spouse for at least 12 months, and you were unaware that your spouse lied on your joint tax return, you can file papers that would compute your tax liability separately. If you have been audited and you believe this rule applies to you contact a tax specialist who has experience with this type of matter.