In Episode 59 of Cases & Cocktails, Bryan and Janice Eggleston welcome back one of the show’s most-requested guests—Michael Boatwright, CPA and founder of Boatwright CPA. Known for making taxes surprisingly engaging (and occasionally terrifying), Michael joins the conversation to break down what divorced or newly separated individuals need to know as they head into a new tax year.

Ep 59 - audio

Over a bold Hot Honey Peach Margarita, the group dives into filing status pitfalls, dependency disputes, and the financial reality shifts that often follow divorce.

Why December 31 Matters More Than You Think

Michael explains one of the most misunderstood tax rules: your filing status is determined by your marital status on December 31. If a divorce is finalized before the end of the year, a person may file as single (or head of household, if qualified) for the entire year. If not, they are still considered married—even if separated.

This rule alone explains why so many clients rush to finalize divorces before year-end. But Michael cautions that while filing jointly is often financially better overall, many divorcing couples choose filing status for non-tax reasons—usually emotional ones.

The Risk of Joint Returns After Divorce

Filing jointly requires both spouses to sign and accept joint and several liability, meaning either party can be held responsible for the full tax bill—even years later if the IRS audits the return. Michael stresses that this risk must be fully understood before signing, especially when trust between spouses has already broken down.

For CPAs, this creates ethical challenges. Once a couple is divorcing, advising one spouse over the other creates a conflict of interest, often requiring accountants to step back and work directly with attorneys instead.

Dependency Claims and IRS Disputes

One of the most common post-divorce tax conflicts involves claiming children as dependents. Michael explains that IRS rules rely on facts and circumstances, not just court orders. The parent with the most overnight stays during the year is typically considered the custodial parent for tax purposes—regardless of what the decree says.

When one parent improperly claims a child early in the year, the other parent may be forced to file on paper, submit Form 8332, and wait for the IRS to correct the issue. While the IRS will eventually award the credit to the correct parent, the delay can be stressful and financially disruptive.

New Reality, New Financial Strategy

Divorce often turns a two-income household into one, cuts retirement savings in half, and disrupts credit. Michael emphasizes the importance of updating W-4 withholding immediately after divorce. Employers will not adjust tax withholding unless instructed, which can lead to unpleasant surprises at filing time.

He also encourages clients to approach the new year with realism. Budgets change. Cash flow changes. And planning must adapt accordingly. The goal isn’t perfection—it’s avoiding avoidable mistakes.

The Takeaway

Episode 59 highlights a critical truth: divorce doesn’t end with the final decree. Taxes, finances, and planning decisions made in the months that follow can have long-lasting consequences. With clear guidance and early action, many post-divorce tax disasters can be avoided.

As Michael puts it plainly: “There’s always an option—but some options land you in jail.”