Question

A couple has filed a joint tax return since they were first married. Because of self-employment income and significant investment income, they have made joint quarterly estimated tax payments. Before year-end the couple has divorced, and they will each file their own individual returns. The estimated payments made jointly while still married earlier in the year will be divided evenly between the two individual returns. What will happen to the estimated payments made jointly while the couple was still married?

1) The estimated payments will be refunded to the couple.
2) The estimated payments will be applied to the couple's joint tax liability.
3) The estimated payments will be divided evenly between the two individual returns.
4) The estimated payments will be forfeited and not applied to either individual's tax liability.

Answer 1

Joint quarterly estimated tax payments made by a couple before divorce can be divided between their individual tax returns. The division of payments is based on mutual agreement or divorce decree and is generally divided evenly unless agreed upon otherwise.

Step-by-step explanation:

When a couple who has made joint quarterly estimated tax payments divorces before the end of the tax year, the estimated payments that were made while they were married can be divided between their individual tax returns. According to IRS guidelines, the allocation of these payments can be made as agreed upon by the divorced couple or as determined by divorce decree or separate maintenance agreement. If no specific agreement or decree stipulates otherwise, estimated tax payments may be divided in any other manner that is fair and equitable. Option 3) The estimated payments will be divided evenly between the two individual returns, should there be a mutual agreement or a proportional basis relative to each individual's tax liability.