Tax Time and Divorce
March 10, 2014 | Divorce
It’s been a hectic couple weeks, which has limited my time to post. But, I’m here now and April 15 is rapidly approaching so I’ll offer a bit on what to do about your taxes.
There are two ways to file taxes when you separate: married filing jointly or married filing separately. Filing jointly is simpler, cheaper, and will get most people a reduced tax bill. However, it requires a little bit of cooperation between you and your spouse and that is not always possible. There are also some potential problems if you believe that your spouse is cheating on taxes–lying about income or assets, misrepresenting information for deductions. That could lead to a huge problem for you if the IRS takes notice and audits. Claiming that you didn’t know what your spouse was doing when he or she made misrepresentations to the IRS will not save you if you filed jointly. Once you sign that tax form, you can count on being held 100% responsible for everything on it.
So, if filing jointly is not an option because you are worried that your spouse will lie on his or her taxes, or because your spouse will just not cooperate, then you have to file separately. If you’re stuck with this situation, the key is to file first. If you file first, you set the rules for the most part and that can save you a lot of money. Take the time and pay the money to go to a professional tax preparer. Determining best options for claiming deductions (to itemize or not to itemize …) can become complicated and confusing pretty quickly. Having a little help from a CPA will make a big difference in the long run.
Finally, did you get a refund from your taxes? If so, keep in mind that it is something that may be subject to division if you haven’t done your equitable distribution yet. Take half the refund, dump it in a savings account and don’t spend it. That way, if you do agree to divide it or a judge orders it split between the parties, you have the ready cash to deal with the situation and don’t have to scramble to find the money or hand over other assets that might be more important to you.