Tax Considerations in Divorce
Amid the pain and stress of divorce, spouses and their legal counsels typically focus on maximizing property settlements. Property values, however, do not equal after-tax cash flow. Not all assets of equal fair market value produce the same after-tax cash. What seems like a reasonable distribution of property between spouses often produces an inequitable tax burden. Our firm advises many clients each year regarding tax considerations in divorce. We work with family law specialists to supplement their advice and counsel to ensure that our mutual clients receive a fair and equitable settlement after the tax implications of divorce are considered.
Another important aspect of divorce settlements is the issue of responsibility for prior years’ tax liabilities stemming from periods when the parties were filing join tax returns, or in some instances, mutually involved in business ventures which have unpaid tax liabilities. Individuals in the throes of divorce, or recently divorced, frequently come to us for assistance having confronted the harsh reality that the IRS, or state taxing authorities, now hold them accountable for payment of back tax liabilities related to the financial transactions of their former spouse. In many cases, one party in a divorce is completely unaware that outstanding tax liabilities exist until they receive correspondence from the IRS Collections Division demanding payment. Several options for mitigating these situations are available to taxpayers according to the facts and circumstances of each case. Our tax professionals are well versed in the tax law provisions for Innocent Spouse Relief, Separation of Liability, Equitable Relief, Offers-in-Compromise, and Community Property issues. Our goal is to resolve these tax matters as quickly and equitably as possible, allowing our clients to close that chapter of their lives and move forward without lingering obligations for unpaid tax liabilities.