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How Divorce Impacts Your Taxes

Going through a divorce is one of life’s most unpleasant experiences, even in the friendliest of cases. Dividing one house into two takes emotional and financial strength. Because it is important to land on your own financial feet after your divorce case ends, knowing how your finances are impacted is one of the most critical aspects of most cases. Issues from alimony, child support, and taxes are just a few of the significant issues to consider when finalizing financial settlement in your divorce.

Knowledgeable family law attorneys will help you reach resolution on support issues within your case, and that could include how your income taxes might change. The IRS website contains helpful information in this regard, and provides some useful tips:

  • When reporting income you are required to report income from all sources, whether alimony counts as income is something your family law attorney will help you learn.
  • Child support is not considered income.
  • Your filing status plays a role in whether support payments are defined as income.

When divorce is initiated prior to an income tax return being filed, a determination as to whether the couple should still file together or separately must be made. The potential tax liability is an important factor in making this decision. Your family law attorney can give you the information needed to make an informed choice about your filing status.

If you have questions about divorce and taxes, consult a qualified legal professional. Let us put our experience to work for you. Call the Sampair Group in Phoenix and the West Valley today to schedule your appointment.

How To Avoid Paying Taxes When Your Spouse Makes An Error

Paying taxes is no fun; it is made all the more frustrating when tax liability exists due to the wrongful actions of another. In some cases you can seek to have your spouse (or ex-spouse) held responsible for taxes even if the return was a joint return. The qualifications for this beneficial status are strict, but if you qualify the results are priceless. This is especially true if you are trying to resolve a tax issue during your divorce.

In cases where an error was made on your joint tax return, but of which you were unaware, you may be considered an innocent spouse. The IRS will allow for a spouse without knowledge of improper reporting to avoid liability for the error. IRS Publication 971 sets for the requirements:

● You must have filed jointly and your return must understate what is truly owed.

● The understated amount must be the result of improper reporting, either by taking deductions to which you are not entitled or by failing to report all taxable income.

● The inaccurate information must have been information that was provided by your spouse and of which you were unaware.

The key is proving you had no knowledge of what your spouse was reporting on your return. This determination requires a thorough analysis of all the facts, such as whether you share banking accounts, who is primarily responsible for finances within the home, and any other factors unique to your situation. Timing is also an issue. You only have 2 years from the date the taxes are due to apply for innocent spouse status. For more information on divorce and taxes, call our office.

For answers to your questions about divorce, consult a qualified legal professional. Let us put our experience to work for you. Call The Sampair Group in Phoenix and the West Valley today to schedule your appointment.

Divorce, Annulment, and Taxes

Very few people seek annulments when a marriage ends. It is most common to simply file for divorce. An annulment is a legal determination that the marriage never legally existed and is often based on fraud, an underage spouse, a close family relationship between the spouse, an inability to consummate the marriage, lack of mental capacity, or already being married to someone else. Some people file for annulment believing it will assist in a religious annulment. Others file because they believe they were married under false pretenses. There is now a new reason to consider an annulment: taxes.

An IRS ruling has held that if an annulment is retroactive (applying back to the date of marriage), the couple was never legally married and thus were not eligible to file joint tax returns. This can be an important distinction, because it allows the couple to refile taxes for the years of their marriage as single people. This may result in a tax benefit and savings.

Note that refiling your taxes for the years you were married could be expensive, particularly if you need to hire a tax preparer or accountant to do so on your behalf. You may also no longer have the needed documentation available. However, the savings could override the cost.

Before you jump into seeking an annulment instead of a divorce, take the time to discuss the differences with your attorney. It is actually very difficult to qualify for an annulment, whereas any couple can get a divorce. You should also discuss whether there are in fact any tax benefits with your tax preparer or financial advisor before you make a decision based on this.

Call the Sampair Group for experienced assistance with divorce, annulment and their tax implications in Maricopa County. Our attorneys are ready to discuss your case and your options with you.

 

 

How Divorce Impacts Your Taxes

Going through a divorce is one of life’s most unpleasant experiences, even in the friendliest of cases. Dividing one house into two takes emotional and financial strength. Because it is important to land on your own financial feet after your divorce case ends, knowing how your finances are impacted is one of the most critical aspects of most cases. Issues from alimony, child support, and taxes are just a few of the significant issues to consider when finalizing financial settlement in your divorce.

Knowledgeable family law attorneys will help you reach resolution on support issues within your case, and that could include how your income taxes might change. The IRS website contains helpful information in this regard, and provides some useful tips:

● When reporting income you are required to report income from all sources, whether alimony counts as income is something your family law attorney will help you learn.

● Child support is not considered income.

● Your filing status plays a role in whether support payments are defined as income.
When divorce is initiated prior to an income tax return being filed, a determination as to whether the couple should still file together or separately must be made. The potential tax liability is an important factor in making this decision. Your family law attorney can give you the information needed to make an informed choice about your filing status.

 

If you have questions about divorce and taxes, consult a qualified legal professional. Let us put our experience to work for you. Call the Sampair Group in Phoenix and the West Valley today to schedule your appointment.

Divorce, Annulment, and Taxes

Very few people seek annulments when a marriage ends. It is most common to simply file for divorce. An annulment is a legal determination that the marriage never legally existed and is often based on fraud, an underage spouse, a close family relationship between the spouse, an inability to consummate the marriage, lack of mental capacity, or already being married to someone else.

Some people file for annulment believing it will assist in a religious annulment. Others file because they believe they were married under false pretenses. There is now a new reason to consider an annulment: taxes.

An IRS ruling has held that if an annulment is retroactive (applying back to the date of marriage), the couple was never legally married and thus were not eligible to file joint tax returns. This can be an important distinction, because it allows the couple to refile taxes for the years of their marriage as single people. This may result in a tax benefit and savings.

Note that refiling your taxes for the years you were married could be expensive, particularly if you need to hire a tax preparer or accountant to do so on your behalf. You may also no longer have the needed documentation available. However, the savings could override the cost.

Before you jump into seeking an annulment instead of a divorce, take the time to discuss the differences with your attorney. It is actually very difficult to qualify for an annulment, whereas any couple can get a divorce. You should also discuss whether there are in fact any tax benefits with your tax preparer or financial advisor before you make a decision based on this.

Call the Sampair Group for experienced assistance with divorce, annulment and their tax implications in Maricopa County. Our attorneys are ready to discuss your case and your options with you.

Does Divorce Affect Your Taxes?

Tax timeBecause divorce rearranges your financial life, it does have an impact on your taxes.

Exemptions

Parents can claim their children as dependency exemptions on their income taxes. When you get a divorce, you both cannot claim the same exemption. Your Divorce Decree may state how you will split these exemptions. If it does not, the IRS rules state that the parent with whom the child spent the most nights with that calendar year is entitled to the exemption. It should be noted that the terms of the Decree as to the division of the tax exemption will be recognized by IRS regardless of the IRS Regulations.

Your Decree may determine which parent may take the exemption each year, but you are allowed to make changes to this if you both agree. However, you should memorialize the agreement in writing, signed by both of you. The failure to allow a parent to take the exemption ordered in the Divorce Decree (by the other parent wrongfully taking it) may subject the wrongful parent to a finding of Contempt by the Court resulting in monetary penalties and other remedies. It’s a good idea to talk to your tax preparer to determine which parent will benefit the most from the exemption.  If a parent will not get any benefit from it, then it makes sense to allow the other parent to take it.

Head of Household

Another issue to work through when it comes to taxes is what is called head of household status. You are permitted to file as head of household if your child spends more than half the year with you, you pay more than half of your own household expenses, and you are single. However these requirements may be affected by the terms of the Divorce Decree awarding the tax exemption.  Filing as head of household may affect how much you pay in taxes. Discuss this with your tax preparer.

Support Deductions

Child support is not a deducible expense for the parent paying it, nor is it considered income for the parent who receives it. On the other hand, spousal support (alimony) is treated in the opposite manner. The person paying spousal support is entitled to deduct the payments and the person receiving spousal support must report amounts received as income. Note that non-taxable lump sum spousal support payments must be created according to rules set up by the IRS to qualify. Your attorney should be familiar with these IRS rules.

Deducting Divorce Costs

You are entitled to deduct the part of your divorce costs (attorney fees as well as fees for other financial professionals utilized in your case) that are related to taxes or tax planning.

The Sampair Group offers clear and honest advice for all family law cases. Call us for an appointment with one of our knowledgeable attorneys in Maricopa County today.

How Will Child Support Affect Your Taxes?

If you are paying or receiving child support after a divorce or separation, there are regulations set by the IRS that control the deductions and exemptions you are allowed because of the payment or receipt of the child support. In any case of financial obligations and regulations that could come with any child support agreement, it is important to hire an experienced Glendale family law attorney that is familiar with the divorce process and all that comes with it.

Child support payments are not taxable. The parent that is making the payments is not permitted to deduct the payments from income, and the parents receiving the payment is not required to claim it as income. In order for this money to be considered non-deductible, it must be labeled as “child support” in the final divorce decree.

There is, however, one important tax consequence that involves child support payments, and that is the Child Tax Exemption. In order to claim someone as an exemption, the IRS requires that you provide more than half of that person’s total support in one calendar year.

In order to get the Child Tax Exemption, the parent must be:
– Divorced or legally separated under a decree of divorce
– Legally separated under a written separation agreement
– Living apart at all times during the last six months of the calendar year
Other requirements include:
– One or both parents provide more than half of the child’s total support for the year
– One or both parents have custody of the child for more than half of the calendar year

The parent who has custody of the child for the greater part of the calendar year is considered the custodial parent and will be treated as the person who has provided more than half of the child’s support. For example, if your ex-spouse pays more toward child expenses than you do, but you spend more time with the child and are responsible for a majority of child care, the Child Tax Exemption will go to you and you can claim the child as your dependent.

The non-custodial parent has the opportunity to claim the Child Tax Exemption if both parents agree and the following criteria are met:
– A written agreement signed by the custodial parent stating that he/she will not claim the child as a dependent.
– A final decree of divorce that states the custodial parent will not claim the exemption for the tax year and the non-custodial parent attaches the appropriate documentation to his/her tax return.
– A final decree of divorce that provides for the non-custodial parent to claim the child as a dependent along with a statement that at least $600 was in fact given in support to the custodial parent.

The non-custodial parents is required to fill out of form 8332 from the IRS and both parents must sign the form, and then attach it to the non-custodial parent’s tax return.

During and after a divorce, you want to make sure you and your children are legally protected and have access to all deserved financial rights come tax season. For more information regarding your legal financial rights during and after divorce litigation involving child support, contact a Glendale divorce attorney at The Sampair Group today.

Divorce and Taxes

divorce taxesDivorce is an emotional process and through all the stress of a separation, it can be easy to overlook important aspects such as taxes and how the split is affecting your financial future. Here are some things to know about taxes and tax credits during the divorce process.

Your filing status is determined by your marital status at the end of the year. If you have completed a settlement agreement and final decree, you can file as single and head of household, which would decrease your tax obligation. To qualify as head of household, you must meet the following requirements:
– you paid more than half the cost of keeping up your home during the year
– your home was the main home for you and your children for at least half of the year
– your spouse has not lived in the home for six months

If you are eligible to file as head of household, you can still file jointly with your ex spouse. If you do file jointly, however, and your ex does not meet their IRS obligations, you can be held responsible.

Child Support
Child support is not taxable to the recipient or deductible to the payor. If child support and alimony are being paid, but the payor is paying less than they are supposed to, the payments will apply to child support first, and then alimony.

Divorce
No divorce costs or legal fees are deductible, as they are considered personal expenses.

Alimony
Alimony is taxable to the recipient, and is deductible to the payor. This is considered earned income and you may need to make estimated tax payments on it throughout the year in order to avoid any penalties when you file. To avoid this issue, you may have your divorce decree state that the alimony will not be deductible to the payor or taxable to the recipient.
If you are the one paying alimony, your payments can be used to reduce your gross income.

Mortgage and Other Expenses
If a home is owned under the name of just one spouse, they are the one that can claim the mortgage interest. Any deductible expenses from join funds are split equally between each spouse, including mortgage interest.

During and after a divorce, you want to make sure you are legally protected and get all of your deserved assets and deductions come tax season. Glendale divorce attorney at The Sampair Group today.

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