The divorce process can be arduous, even for those who initiate the procedure and look forward to one day beginning a new life. Issues such as child custody and child support, property division and spousal support, if appropriate, are among the legal matters New York residents must settle during a time of emotional upheaval, stress and uncertainty. While living arrangements for all the family members is paramount, financial concerns are intrinsically intermingled. In the struggle to afford the necessity to create two households where once there was one, tax matters can be overlooked.
Tax experts caution that the biggest liability falls upon those who are uninformed of the family’s financial situation prior to the divorce. Although it is not unusual for one spouse to be the primary or sole wage earner where the couple files taxes jointly, each is liable for all the taxes owed. This is true, with some narrow exceptions, even when one spouse did not earn income and had no responsibility for or knowledge of the family tax situation. This is most problematic if there is a tax delinquency at the time of divorce but also becomes an issue when the couple begins paying taxes as separate individuals instead of jointly.
Paying taxes as two individuals is not as simple as merely dividing the joint tax liability in half, and the terms of the divorce may create a taxable event that had not previously existed during the marriage. For instance, selling the family home outright to a third party may trigger capital gains tax. Similarly, splitting retirement accounts or offsetting different types of assets and liabilities to achieve a fair and equitable settlement has potential tax consequences that should be factored in to any agreement.
Divorce requires an objective assessment of many important matters during a time of great stress. A family law lawyer may be of value in explaining the issues.
