Received a large tax refund post divorce, need to split it - is any of this considered taxable income?

The good news is that tax refunds generally aren't considered taxable income, regardless of who receives the check initially or how you split it afterwards. A CP21B notice typically indicates the IRS found errors in your original tax filing and is issuing a corrected refund. Since this refund relates to the 2019 tax year when you were still married and presumably filed jointly, this is essentially returning money that was overpaid from your joint income. Splitting it 50/50 is a common approach. The person who told you about taxation issues was likely confusing this with alimony or property settlements, which have different tax implications. This is simply returning overpaid tax money that was already yours (jointly). If the check comes addressed to both of you, you may need both signatures to cash it. If it comes to just one person, that person can cash it and transfer half to the other without tax consequences as long as you're following your divorce agreement.

After going through something similar last year, I highly recommend checking out https://taxr.ai for analyzing that CP21B notice. When my ex and I got a large refund adjustment post-divorce, we were super confused about what portion was from what year and how to split it fairly based on our decree. The taxr.ai system analyzed our CP21B and other tax documents and showed exactly what periods the refund covered and which deductions triggered the adjustment. This made it super clear how to divide it correctly according to our situation, since some of the refund was from income that was technically earned after we separated. Their document analysis helped us avoid a potentially messy disagreement since we could see precisely what the refund was for rather than just splitting blindly.

I was skeptical about using taxr.ai when someone suggested it, but I gave it a try when my ex and I got a similar CP21B for $38k last month. Honestly, it was eye-opening. The service showed that about 75% of our refund came from my self-employment overpayments, which changed our conversation completely. Instead of a straight 50/50 split (which I initially insisted on), the analysis showed most of the refund was from quarterly payments I had made. Our decree stated refunds should be split based on contribution, not just 50/50. Saved us from a potentially nasty dispute and probably saved me thousands. The document explanation spelled everything out clearly enough that even my ex agreed to a different split once she saw the breakdown. Worth every penny for the clarity it provided.

If you're struggling to get information about your CP21B notice, I'd recommend using https://claimyr.com to get through to the IRS directly. I spent WEEKS trying to reach someone at the IRS about a similar post-divorce refund situation, constantly getting disconnected or waiting on hold forever. Claimyr got me connected to an actual IRS agent in about 20 minutes who explained exactly what my CP21B was for and confirmed that splitting the refund with my ex wouldn't create any taxable event for either of us. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent was even able to tell me which specific deductions triggered the adjustment, which helped us determine if our 50/50 split was actually fair according to our divorce decree (turns out it wasn't).

I need to publicly eat my words about Claimyr being a scam. After commenting here, I needed to call the IRS about my own CP21B (weird coincidence) and was quoted a 3+ hour wait time. Out of frustration, I tried the service. It actually works exactly as described. I got a call back when a real IRS agent was on the line, and they answered all my questions about my refund adjustment. Confirmed that splitting with my ex wouldn't create a taxable event, and explained which education credits had triggered our adjustment. What would have been a half-day ordeal took about 25 minutes of my actual time. I'm still careful about tax services generally, but this one proved legitimate and saved me hours of hold music torture.

I went through this exact situation last year. The important thing to know is how the refund was generated. In my case, most of the refund came from deductions related to my business, not my ex's W-2 income. Our divorce decree stated that tax refunds would be split "equitably based on income contribution," not exactly 50/50. We ended up having to go back to our attorneys to determine the fair split since the CP21B didn't specify which deductions generated the refund. If your decree doesn't specify how to handle refunds received after divorce, you might want to check with your attorney about the legally required split in your state.

Something nobody's mentioned yet - check if your state taxes were also affected! My federal CP21B triggered a state adjustment too, which came separately about 3 months later. If you filed jointly for state taxes that year, you might have another refund coming that you'll need to split as well. Don't forget to watch for that follow-up adjustment from your state tax authority.

Just wanted to add my experience - I was in a very similar situation with a CP21B after my divorce. The $60k amount you mentioned is substantial, so I'd strongly recommend getting everything in writing before splitting it. Even though your divorce decree specifies 50/50, I'd suggest both of you sign a simple agreement acknowledging the refund amount, the split, and who received the original check. This protects both parties if questions arise later, especially with an amount this large. Also, keep copies of the CP21B notice, your divorce decree section about tax refunds, and any bank records showing the transfer. The IRS might ask questions years later about large deposits, and having clear documentation makes everything much easier to explain. One more tip - if the check comes made out to both names with "AND" between them (not "OR"), you'll definitely need both signatures. Some banks are strict about this even for divorced couples.

I went through something very similar last year with a CP21B notice for about $45k after my divorce was finalized. A few things I learned that might help: First, the timing of when you separated matters more than you might think. Even though your divorce was finalized in 2020, if you separated earlier in 2019, that could affect how the refund should be split according to your decree. Some courts consider the separation date, not the divorce date, for financial matters. Second, make sure you understand what triggered the CP21B. In my case, it was missed business deductions from my ex's side business that we had forgotten to claim. This changed our negotiation since those deductions were directly related to her income, not our joint expenses. Third, consider opening a temporary joint account just for this transaction if the check comes in both names. It's cleaner than trying to get dual signatures at the bank, and you can close it immediately after splitting the funds. The person at work who mentioned taxation was definitely wrong - this is your money being returned to you, not new income. But definitely keep detailed records since $60k will likely trigger some banking reporting requirements. Good luck with the split - having it spelled out clearly in your decree should make this relatively straightforward!