A divorce or separation can lay a critical impact on every aspect of your life. It is a cumbersome process from calculating the total net worth to filing for tax in the upcoming fiscal year. Taxes and divorces are two of the most complicated issues that should be addressed beforehand. An appropriate tax consideration could ensure fairness and justice in the divorce settlement.
What are the Major Taxation Issues?
Few of the most common tax issues associated with the divorcing couples are explained below:
1. Filing of Tax – when a couple files for a divorce, they have some options in front of them for filing tax, like to file it jointly, independently or by a married filing separately option. Choosing the right category according to your terms of settlement can help you in filing your tax easily. You can explore the options with your lawyer keeping your differences aside as this shall be for the benefit of all.
2. Claiming Dependents – One of the major decisions to be made while filing for a divorce is the child custody. As per the law offices in Ukiah, only the guardian who gets the custody of the child can claim the children as their dependent, during the tax filing process. However, both the parties can also go for dependency exemption which shall again benefit both sides.
3. No Systematic FinancialRecords – Unorganized financial records can lead to a lot of confusions and make the settlement process quite difficult. So, make sure that you have properly organized receipts, assets, and other payment records with you in order to easily evaluate the tax liabilities and deductions.
4. Failing to apprehend tax regulations – If a couple is filing tax separately under the category of married but separated or independent, they need to clearly understand the tax regulations applicable for the year. The person paying alimony has to deduct the amount from his/her taxable income, and the person receiving alimony should add the amount to his/her overall income. This can lay a significant effect on one’s tax liability.
5. Tax Fraud – This is a serious offense and could put both the parties in legal proceedings which can go on for several years. In order to avoid such a situation, it is imperative to make sure that you have shown every single income information and asset details while filing for tax.
What should be done?
To simplify your legal processes for divorce, you should speak to your legal advisor at the Ukiah Family Law to seek his/her guidance on all your tax-related issues. In case of any discrepancies, your settlement process might take a longer period of time. For more information on the tax-related hassles, call us now on 707-542-5611.