Tax time can be especially stressful for couples who have recently finalized their divorce. Should they file jointly or separately? How should couples file taxes if they are still in the divorce process? Negotiating and filing taxes can be especially difficult for estranged couples who are no longer communicating. When preparing for tax season, you want to focus on ensuring that you are paid up so that you are not audited or held liable for past tax debt. You also want to make sure that you are not overpaying for your own tax liability.
Regardless of whether you are the sole breadwinner, a dependent spouse, or if you shared financial responsibilities equally, it is important to have a clear understanding of your rights and obligations under tax law. OurBirmingham divorce attorneys are experienced with helping clients understand the immediate and long-term impact of divorce. We can help you protect your financial security and guide you in finding necessary resources when filing taxes or preparing for tax season after divorce.
Couples filing separate tax returns could face an audit if there are too many discrepancies in their returns. After divorce, the way that income and support is divided and paid out will impact your tax liability. This is why during the settlement process, you should work with an experienced advocate who can keep you informed of how your settlement will impact your future tax obligations.
For example, any spouse who collects alimony will have to claim that amount as income. Similarly, any spouse paying alimony or spousal support can write that amount off of his income. Spouses may get into trouble if one spouse continues to pay bills or provide legitimate support without it being claimed by the other party as income. Couples also must decide who will be claiming a child as a dependent for exemption purposes. Who is claiming medical or housing expenses as a deduction? Did you know that child support payments are not deductible or taxable for recipient? Rules can be complicated, but any conflicting statements or miscommunications could raise a red flag for the IRS.
In many cases, disagreements or disparities will come down to a lack of communication between parties. You don't want the IRS getting involved in what could be resolved between you and your former spouse in advance. Understandably, couples who are going through divorce or who have recently finalized a divorce are dealing with personal, emotional, and financial upheaval. Knowing the tax law and how to protect your rights can help you avoid future headaches and IRS scrutiny.
Even if it is uncomfortable, divorced couples should be open and communicate about tax issues to avoid misunderstandings and misrepresentations. If it makes the process easier, you could also work with an experienced tax attorney who can help to sort through complicated legal issues to avoid any mistakes. Tax law is complicated and leaves many traps for the unwary. Getting prepared early and communicating long before the April 15th deadline can help you minimize tax obligations and prevent tax debt or criminal liability.
Contact Birmingham Family Law Attorney Steven Eversole at (866) 831-5292 for a free consultation.