Butler Divorce Tax Matters Lawyer
Divorce brings on a variety of tax issues that arise from alimony, division of assets, child custody and other matters. You are responsible for understanding these state and federal taxes implications, which are sometimes complex given the specifics of a couple’s situation. In order to protect yourself from overpayment, underpayment, or being caught up in your spouse’s scheme to underreport, which can happen during divorce, it is highly recommended that you work with an experienced Butler divorce tax matters lawyer here at Bunde & Roberts, P.C., where we have more than 100 years of experience handling all facets of tax and divorce.
Filing a Joint Tax Return
In the eyes of the IRS, you are still married if your divorce has not been finalized by December 31st. As such, our clients prefer to file a joint tax return with their divorcing spouse. This may or may not be your best option, as there are some potential issues with filing jointly during a divorce. One of these includes the possibility that your spouse is misreporting income, in which case you could potentially be held accountable for taxes due. Whether you file jointly or not, an attorney can offer various safety measures, such as drafting an indemnification agreement before filing jointly, in order to avoid any unforeseen tax liability or problems down the road.
IRA Tax Deferrals
When an IRA is distributed to one of the spouses during divorce, the net value of the IRA must be compiled, which includes taking into account the future tax consequences. Without considering the future tax consequences, the spouse that ends up with that IRA distribution is essentially being allocated a smaller amount of assets than they are owed. This is just one of many tax implications that needs to be considered during division of marital assets during a Pennsylvania divorce.
Tax Issues Surrounding Spousal Support, Alimony, and Child Custody
The three forms of alimony in Pennsylvania (spousal support, alimony pendente lite, and alimony) can be taxed to the receiving spouse and deducted from the income of the paying spouse as long as certain IRS requirements are met and the divorce agreement was entered before 2019. But for more recent divorces, including yours, the federal Tax Cuts and Jobs Act (TCJA), paying spouses can no longer deduct these alimony payments from their income. According to the American Bar Association, this has made alimony negotiations more contested than ever, as it has effectively erased the incentive for wealthier spouses to agree to higher alimony payments. The TCJA has also had a big impact on tax exemptions for the custodial parent, as well as other deductions.
A Butler Divorce Tax Matters Lawyer is Here to Help Today
Unfortunately, tax implications are often overlooked during divorce, as the more pressing issues of child custody, alimony, and division of assets generally take center stage. But make no mistake, taxes must be considered during divorce, as they can have a dramatic impact on your life in the future. Contact the Butler tax matters lawyers at Bunde & Roberts, P.C. today at 412-391-4330 to schedule a free consultation.