common law marraige break up

[Kea]

I have a client who was in a common law marriage. I was filing them MFJ. He called today to say he would now be filing single since they broke up. I asked if they got a divorce and he said "no." I believe you need a divorce to dissolve a common law marriage. His that true? It doesn't end as easily as it started, right?

If there is no divorce I think I still have to file him MFJ or MFS. Even if I go MFS, this is a community property state and they would have to split everything 50 / 50. Getting her info (if any) could be tricky. I have prepared their returns for several years and she never had any income. I don't know about 2009, yet.

Thanks

[GeneInAlabama]

In Alabama, a common law marriage is the same as a regular marriage. They are considered married until a divorce is filed and it becomes final.

[baystorm]

It should be a matter of State Law in regards to whether or not they have to go through a "judicial" process to terminate the marriage. Based upon past experience I would suggest that you make sure you have an engagement letter or just prepare the return for one of the spouses but not both.

I had a situation several years ago whereby I was preparing the couples return for about 8 or 9 years and then they got a divorce. I prepared two separate tax returns but of course the one spouse was not happy on how I allocated some of the deductions between the two returns and it started to get ugly (even though I did everything proper)

My policy is now that when a couple is divorced, getting divorced, etc., I will only retain one spouse as a client and tell the other spouse (in a nice way) to go elsewhere.

good luck

[jasdlm]

I am a Kansas attorney, but I believe (based on a quick search of my materials) that Texas does require a divorce to terminate a common law marriage.

[Lion EA]

You'll have to check with your state to be sure, but I never heard of a common law divorce.

As for MFS in a community property state, again you'll have to check your state law, but you probably don't have to split income earned after they are no longer living together, do you? How would any one get that information if they left the relationship or were left. I sure don't share my financial information with my ex.

[Kea]

I was concerned about how to file it if they are still "married." Since it's community property how to you get her info to use half and how would you know she would file with 1/2 of his income? It would be much easier to file with just his info, so I like your suggestion that he file file with just his income after they split. He will be massively penalized filing as MFS. He'll still be shocked when he sees how much higher is taxes are single than married -- especially since she previously had no income. But I'm sure tax consequences were not a consideration in the break up.

I'll try to search for the state laws regarding dissolving a common law marriage. Not sure where to look, but I'll start with the trusty Google.

Thanks

[Lion EA]

I didn't suggest you not split income; I suggested you find out what your state law says about splitting income after the couple splits. And, I'm pretty sure that you at least have to split income earned during the time they were still together. Don't know how you get that info after the fact if the split was nasty.

[Pacun]

Common law marriage is accepted in DC. If you want a divorce, the first thing they ask you is your marriage certicate, though.

In your case, let's say that the wife becomes disabled and the husband dies, do you think the Social Security Administration will give the wife any benefits because her common-law husband died? As you said before, she didn't work, so she would not qualify for SS benefits on her own.

I used to work for a lawyer and she said that for a common law marriage to be valid, they have to bring it in front of a judge and the judge will determine if you are common-law married. She said: Let's say, for example, that a disabled person lived with someone for a long time as husband and wife. Then the abled person dies and there is an inheritance to be shared with other beneficiaries. The disabled wife would have to go in front of a judge to validate their marriage. She went on to say, of course the judge most likely will certify the marriage since no one wants to leave a disabled person with nothing. In the case of two people with equal opportunities, the judge might not even hear the case.

I had a case today where the boyfriend supports 100% his girlfriend (who didn't have any income) and she lived with him the whole 2009, I told him to claim her as a dependent. Why will I suggest MFJ? (I know... because the tax rate will be lower and the standard deduction will be doubled). Let's say that the wife says, since I didn't work, I do not want to file any taxes, nor do I want to be responsible for his taxes. What will you do, file him as MFS?

[Kea]

I checked with a lawyer who said that they need a real divorce in TX. I did not address the community property issue since I figured that was out of her area.

[kcjenkins]

Remember, filing joint returns is one of the 'indicators' of "holding yourself out as married" which is part of establishing a commom-law marriage. They definitely do need a divorce, or else the only option is MFS unless the client has a child living with him, to qualify for HOH.

[jainen]

>>It would be much easier to file with just his info, so I like your suggestion that he file file with just his income after they split<<

It might be easier to file that way, but he might find it more difficult to pay the tax. Why not split his income? It's a one-way split since (presumably) she doesn't have any income to allocate back to him. Anyway, Pub 555 at http://www.irs.gov/pub/irs-pdf/p555.pdf says she can't split her income unless she tells him about it by the due date for filing the return (including extensions).

Here in California the community ends when the spouses separate permanently. But in Texas, as I understand it, the community continues until the marriage is legally ended. So in my opinion you should give his ex-lover a copy of the W-2 on October 15 and only count half on your client's return.

[Kea]

When I said I liked the suggestion of only using his income I was referring only to its simplicity. It would obviously hurt my client's tax liability. If I can get her info (if she has any in 2009), it makes more sense to go ahead and file MFJ. If he can get her info he can probably get her signature. He may have to give her half his refund (if any). But that could still be the better tax bottom line.

I should be getting his info today and I'll get a chance to learn if they are still on speaking terms & if he knows if she had any income and what date they split.

Thanks so much for all the suggestions.

[BulldogTom]

The code section for spiliting community income in in the 50's I think (maybe §55 - but I would have to look it up). The rules are that the spouses must exchange information before the due date of the return. In practice, this will generally never happen. I did one of these (divorced after marriage, not common law) and I split the income from the date the community ended in CA. I had my client give this to his attorney to give to his spouse. I listed the relevant code section in the letter with all the supporting documentation of the split. My client's attorney would not deliver to the spouse's attorney because it would have complicated the divorce. Divorce attorneys seem to not like to have to deal with tax laws.

The IRS does not like splits either. They know what the code says, but it screws up their matching when the W2's, 1099's etc don't come out on the return as they think they should. I had an IRS agent tell me that if they get a split, it will increase the chance of an audit, but if each spouse claims their own, they will generally let it slide because they don't like to audit divorcing couples who are fighting. This was not an official communication from the agent, just a casual conversation at a tax seminar.

Tom

Lodi, CA

[Kea]

I try to avoid MFS as much as possible for those reasons. I've generally been able to convince clients to file MFJ when I explain how much it helps both of them. But that's not always an option.

[kcjenkins]

And you should always keep in mind, and remind the client, that sometimes it's much cheaper in the long run to file MFS and pay a bit more tax, but avoid being tied to the other partner's obligations, having to share information, etc. Often it's better to just pay a little more to Uncle and avoid having to deal with the ex over the tax issues. And they even have the option, for 3 years, to amend and file jointly, if things reach a peaceful level after all the issues of the divorce are dealt with.