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Statistics tell us that nearly half of all marriages will end in divorce. The average time frame from start to finish is about three years. During this period many tax issues will arise that need to be resolved. This period of time is painful for both parties. It is painful financially, emotionally, and socially. An additional painful situation involves income taxes. This does not become apparent until the process is well under way. Filing joint returns can create tax complications when a divorce is pending. Many embittered spouses take contradictory positions, which can be unreasonable. They either conceal or fail to provide adequate accounting to the other party. Misunderstanding can arise because splitting a joint return into two separate returns is not as easy as combining two returns into one. When separating into “his” and “her” returns there are many items to consider. Among the items to consider are: filing status, alimony, child support, capital gains and losses, mortgage payments, medical expenses, retirement funds and other related deductions. The items most argued over are who gets to claim the dependency exemptions for minor children, the Earned Income Credit, the Child Tax Credit, and the Child Care Credit. All of these, and other tax and non-tax matters, can be resolved with proper planning. It is important for both parties that planning takes place as early as possible in the divorce process. It doesn’t matter what the agreements say about who is responsible for paying any income tax liabilities. The Internal Revenue Service follows the money and the assets and it may not lead to the one who took responsibility. We would be happy to meet with you and review these matters and how we can help.
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