Articles Tagged with Taxes

does-adultery-affect-alimony-in-idaho-1080x600-1When the parties to a Texas divorce agree on a property division, they may agree that certain obligations or conditions must be met.  If a party fails to meet their obligations as agreed to and set forth in the divorce decree, they may not be entitled to the property they were expecting.  In a recent case, a husband challenged a court order requiring him to reimburse the wife for certain tax liabilities after she failed to provide him the documentation required to calculate the amount he owed in accordance with the decree.

Wife Fails to Comply with Requirements of Divorce Decree

The parties’ mediated settlement agreement was incorporated into their divorce decree. The decree required the wife to withdraw funds from the husband’s pension plan. After paying certain debts, her attorney was to distribute 30% of the remainder to the wife and 70% to the husband. The decree required the husband to reimburse the wife 70% of her income tax liability for those funds. The decree ordered the wife have two draft income tax returns prepared, one showing the pension plan funds as income and the other not including the funds, to allow the husband to calculate that reimbursement. She was to provide the husband with the draft returns by June 1 of the year after the year the funds were liquidated.

The wife hired a tax preparation company.  The first draft return was a joint return with her new husband and included his wages, her wages, her social security disability income, and the liquidated pension plan funds.  The second draft return indicated it was a joint return, but only included her wages.  She sent the drafts to the husband before the deadline. He informed her he needed a draft return that included only her wages and the liquidated pension plan funds.  The wife went back to the tax preparer multiple times, but said they kept getting it wrong.

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In many families, one spouse takes primary responsibility for all the family finances, including the preparation of the joint income tax return. A joint income tax return may provide tax benefits to families that would not be available from filing two separate returns. However, in order to file a joint income tax return, both spouses are required to sign the return. The result of filing a joint tax return is that each spouse is joint and severally liable for any reported tax liability, along with any additional tax, interest, and penalties assessed on the return by the IRS. Even if the couple is later divorced, both spouses remain joint and severally liable for the total liability associated with the joint return. But is this fair to the spouse who did not handle any of the family finances? What if the spouse was also the victim of abuse or domestic violence and was prevented from accessing any of the family financial records?

Congress and the Department of Treasury have created Innocent Spouse Relief, which gives the innocent spouse the ability to request relief from the IRS for the joint liability associated with any additional tax, penalties, or interest assessed on the joint return. To qualify for Innocent Spouse Relief, the innocent spouse must meet all of the following conditions:

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How will divorce affect my taxes?  Eventually, almost every person going through a divorce must address this question.  As you might imagine, divorce affects your federal tax return in numerous ways.  The issues that arise most frequently include Continue Reading ›

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