Tax-Time Reminders In Family Law Cases

Around tax time, if you are divorced with children, are going through a divorce, or have an order on custody or parenting time from a paternity matter, there are important tax issues to address with your co-parent. Knowing what to discuss and discussing these topics early can alleviate conflict and provide sufficient time to resolve any disputes over taxes sooner, rather than later.

1) Couples in the Middle of a Divorce. For spouses who have an active divorce case, maximizing tax benefits, or minimizing tax liabilities, is key. The tax refund from 2014 is a marital asset which can be divided in a final divorce settlement. If you or your spouse are not agreeable to filing jointly, discuss this issue with an attorney, as filing jointly typically maximizes the refund.

If you and your spouse cannot agree on what to do with the refund (for example, one person wants to keep the entire return versus the other who wants to divide it equally), it is important to speak with an attorney about how to deal with this matter. Many times, attorneys can hold these refunds in trust until an agreement can be reached on the use of the refund, either during the divorce or after the divorce is filed. As the refund is an asset of the marital estate, the use of the funds can be allocated differently, depending on the other assets and liabilities of the marital estate.

If money is owed, this issue would also need to be addressed, as sums owed would be due and the tax liability is part of the marital estate. The party paying the taxes can receive a credit for this payment, and the payment of the joint liability could offset other assets to be awarded or could reduce their obligation on other marital liabilities.

2) Divorced Parties With Children or Parents With a Paternity Order. For couples with a custody and child support order, whether through a divorce or a paternity case, Indiana law provides a means for courts to evaluate who can claim the child(ren) for tax purposes. Many times parties agree on their own terms for this issue, as well. Be sure to check your agreement or order on this issue and to execute all necessary IRS forms.

3) Parents Paying Child Support. For those parents who are paying child support, in order to claim your tax exemption, you must be 95% current in your child support payments for the year 2014. Be sure to check your order or agreement on this issue, in case there are any further details regarding the child support amounts to be paid which may affect claiming the exemption.

Again, the sooner you and your spouse or co-parent discuss tax-related matters, the sooner you will know if there is a problem. If there is an issue or if you have any questions about your tax options, consult with an attorney who practices predominantly in the area of family law. Generally, agreements on tax matters are more encouraged, as the cost-benefit of litigating these issues may not be favorable; however, it is important to understand what options and obligations you have as tax season approaches.

Always consult with an attorney and CPA regarding your particular circumstances as this article provides general suggestions and is not legal advice.