The next couple of weeks will be quite busy for accountants and tax preparers. The federal tax filing deadline is quickly approaching and many people who are in the midst of divorces may be unsure of how they will file their taxes, and are unsure of what the consequences will be.
For those who owe taxes, especially those who have experienced windfalls from the sale of a business or significant real estate holdings, this could be yet another thing to fight about in property division negotiations. In the meantime, it is best to prepare for this year’s taxes, and a Forbes article notes some important points for potential divorcees to consider. We highlight some of those points here.
Learn how divorce will affect your tax status – While your 2017 taxes may not be affected, a divorce finalized in 2018 will likely affect your tax filings next year. This is especially important if you sell property or investment accounts, because the payment of capital gains taxes may be a point of contention to be resolved in your divorce decree.
Understand that all dollars are not created equal – Depending on the asset, you may be awarded tax free dollars (such as a transfer or payment to one’s retirement account) or a disbursement that will be subject to heavy taxes. Either way, it is important to understanding that not all dollars received in a settlement are equal.
Check your credit report – It is common during marriage for couples to have joint credit card or loan debts. While you may agree on who will be responsible for paying off such debt, you may still be noted on the account because of the contract with the third party creditor.
If you have questions about tax liability after divorce, an experienced family law attorney can advise you.