When it comes the time to reach the divorce settlement, it is best to be prepared with the understanding that there are tax consequences that come along with it. By engaging a knowledgeable Ventura County family attorney to represent you in your case, you will get the help that you need to understand any tax consequences that may apply to you. Below are four examples of tax consequences that may arise from a divorce settlement.
Contingent Tax Liabilities
A contingent tax liability is when a tax liability does not currently exist but could become a liability, depending on the occurrence of a future event. For example, a contingent tax liability may be related to additional taxes resulting from a couple failing to file taxes for one or more years. Another example is when the couple may have an ongoing dispute with the IRS over taxes owed.
In the case of an ongoing dispute, the parties should create a plan that contemplates both the best and worst case scenarios with respect to the possible outcome. By taking this into consideration, the parties can create a range of values that the parties can come to expect. That way, if the actual outcome ends up falling somewhere outside of that range, the parties may include as part of the plan the ability to renegotiate the settlement.
Fraudulent Tax Returns
You may find yourself in a situation where you are married to someone who has filed a fraudulent tax return. You should be aware of provisions that can be included in the settlement that can protect you, the innocent spouse. You should speak with an experienced Ventura County family attorney to go over these provisions.
Filing a Tax Return during the Divorce Process
As you can imagine, filing a joint tax return in the middle of divorce proceedings can be a difficult task. When the parties to the divorce are in such adversarial positions, getting them to cooperate for a joint tax return is sure to be met with some resistance on both sides. If both parties can be made to understand that filing a joint return can result in savings for both parties (because filing separately carries a much higher tax rate), this can serve as an incentive for them to work together on filing a joint return.
Quarterly Reporting and Withholding
As previously mentioned, the adversarial nature of divorce can cause divorcing parties not to cooperate with each other. As a result, some details can get overlooked. For example, the divorcing parties may overlook how much income taxes should be paid on a quarterly basis or how much should be withheld from paychecks. However, if the parties can resolve to consider this issue it creates the benefit of avoiding any unpleasant surprises later.
Are you a party to a divorce? You have an experienced Ventura County family attorney here to help. Please contact the law office of Gary Mitchell for a preliminary consultation.
Gary Mitchell, Attorney at Law
Westlake Village Divorce Lawyer
4195 East Thousand Oaks Blvd Suite 240
Westlake Village, California 91362