Tax Implications & Divorce Lawyers
Divorce, all on its own, is an emotional issue that is full of potential pitfalls and potential hostility. It is an incredibly complex process, in other words, that has the potential to significantly impact most aspects of your life. It should not be surprising, then, to hear that divorce can impact your finances as well. To be more specific, divorce has the potential to complicate your tax situation. That’s one of the reasons why it is so important to pay attention to your divorce proceedings and retain an experienced divorce attorney who can help advise you of the potential consequences of your divorce terms.
There are a few different tax issues that come up as a result of divorce. These have the potential to be minor, or to cause serious financial ramifications that can have a serious impact upon the financial well-being of the individual experiencing them. Some of the more common tax mistakes that are made after a divorce is complete include:
- Filling out the QDRO (Qualified Domestic Relations Order) form after the divorce has been completed when the marriage in question had one or more retirement funds
- The wrong spouse, or both spouses, claiming a child as a dependent
- Splitting investments so that one individual is subject to a tax bill as a result of huge capital gains.
- Failing to claim spousal support as a deduction (the payer) or income (payee)
- Claiming child support as income or a deduction
- Not deducting financial and legal fees connected to the divorce (not all expenses are allowed to be deducted, but some are)
As you can see, there are a myriad of ways that you can find yourself in trouble when it comes to taxes related to your divorce. It is important, then, that you speak with an experienced attorney who understands the potential issues you might encounter and is able to advise you of your rights and necessities throughout the process. Don’t make a mistake and end up on the wrong side of the IRS.
Are these tax issues serious?
One question that we see often is how serious these tax issues really are. It is important to keep in mind that, as with all tax issues, they can become very serious, very quickly. In fact, you might find yourself with hefty penalties to pay, depending upon the specific error that you made. It is a good idea to speak with a professional regarding your taxes and how your divorce can impact them. This is perhaps especially true as not all tax issues related to your divorce are negative in nature. Sometimes you can actually claim deductions that make your life easier. The problem is that taxes are inherently complicated, as are divorces, and trying to figure out how tax issues relate to divorce issues can be especially confusing.
Avoid Tax Implications
In order to help avoid tax hits, it’s a good idea to pay close attention to the information you receive from the courts. Many asset transfers that are incident to a divorce, for example, are not recognized as a taxable gain or loss, meaning that you might be able to skirt tax implications from certain divorce decrees regarding property division.
Undergoing a divorce is taxing enough – the last thing you want to do is find yourself in any kind of trouble after it is finalized. Instead of taking the chance to end up with serious issues that impact your financial stability, make the decision to speak with an experienced divorce attorney in Alabama from the start. They can help you understand the terms of your divorce and what the various fees and payments mean with regards to filing your taxes. They will work hard to ensure that you claim all that you need to claim, as well as do their best to make sure that you don’t end up agreeing to divorce terms that will end with you experiencing a huge tax burden at the end of the tax year.
If you are contemplating or in the middle of a divorce, you should reach out to attorneys who can help ensure that your rights are upheld. Lloyd & Hogan, Attorneys at Law, can help. We offer free consultations and are ready and willing to hear about your case. Contact us today for more information.