Virtually every issue relating to marital separation and dissolution has tax consequences, requiring tax planning and decision-making. Tax-related decisions must be made on matters concerning support and tax return filing during the separation period, the community estate division, the terms of spousal and child support, exemptions for children, and estate planning.
The family law attorney must work with the client as to what would be to the most advantage on tax issues. For instance, there is a procedure after filing a marriage dissolution (divorce) in court to have the case “bifurcated” so that the parties can file tax returns as a single person or head of household. IRS information on Exemptions, Standard Deduction, and Filing Information, and Taxes; Married Filing Separately, Joint or Single? Find Out Your Filing Status.
In addition, the allocation of support payments may be classified as “family support” instead of the division of child support and alimony (spousal support) to create a major deduction. View the Child Support Calculator.
Moreover, tax returns are a major instrument in revealing income for support purposes and must be produced to the other party. The items in the tax returns are entered into a computer program called “dissoMaster” to determine the amount awarded a party for support. The computer program automatically calculates what percentage of income should be allocated to tax obligation.
In another important category for the tax aspect is the taxable transfers of marital property such as pension and profit-sharing plan benefits, stock and partnership interests, cash-out settlement divisions, allocations of interest payments on mortgages and the list goes on. Read more about Qualified Domestic Relations Order (QDRO).
RoseAnn Frazee is experienced in the tax aspects of family law practice and prepares QDRO’s (Qualified Domestic Relations Order) and other instruments to facility the best tax advantage to the parties. Further, she works with CPA’s and other tax advisers on these issues.
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