Calabrese Associates, P.C.

Call Us630-393-3111

4200 Cantera Drive, Suite 200 | Warrenville, IL 60555

Subscribe to this list via RSS Blog posts tagged in divorce and taxes

DuPage County divorce attorneyEven if you and your spouse own significant assets, you may experience financial difficulties after your divorce. This can occur because of large costs during the divorce process, due to wasting or dissipation of assets by one spouse, or because you have trouble covering your ongoing expenses on a single income. The situation can become even worse if the IRS informs you that you owe money based on tax returns that were filed while you were married. Fortunately, you may have options for addressing this issue and ensuring that you will not be penalized for your spouse’s actions.

Understanding Post-Divorce Tax Debts and Innocent Spouse Relief

Both you and your ex-spouse are responsible for taxes on any joint tax returns you filed while you were married. This means that if the IRS decides to audit you based on any of these tax returns and it determines that taxes are owed, it can take action to collect the amount owed from both you and your spouse. Even if your divorce decree states that your spouse will be solely responsible for these tax debts, the IRS can disregard the court’s orders in these matters and collect money from both of you.

However, if errors on your tax returns were the sole fault of your ex, you may be able to avoid liability through innocent spouse relief. To qualify for relief, you will need to show that any underpayment of taxes occurred because of errors made by your ex-spouse on a joint tax return. At the time you signed the tax return, you must not have known or have had any reason to know about these errors. If the IRS determines that the tax debts are the fault of your ex-spouse and that it would be unfair to hold you responsible for these errors, you will not be required to pay these debts.

...

Elimination of Alimony Deduction Gives Urgency to DivorcesNegotiating spousal maintenance agreements during divorce may become more contentious because of a change to a long-standing tax law. The federal tax reform bill passed in late 2017 eliminated the popular alimony deduction for federal income taxes. The deduction is an incentive for higher-income spouses to agree to pay spousal maintenance. With the uncertainty that the change has created, many divorcing couples are rushing to complete their agreements before the law goes into effect.

How It Works

The current tax law allows spousal maintenance payers to deduct the value of their annual payments from their total taxable income. The maintenance recipient must report the money as taxable income. The change to the law will make maintenance tax-neutral. The payer can no longer claim a deduction, and the recipient will no longer pay taxes on the payments. There are three caveats to the law that benefit those who want to continue using the alimony deduction:

...
Back to Top