Taxes and Divorce — Wasn’t the Divorce Enough Trauma?

Taxes and Divorce — Wasn’t the Divorce Enough Trauma?

Your divorce attorney is likely NOT a tax attorney. However, your divorce attorney should alert you to potential tax related issues from your divorce and get you to see a tax attorney – sometimes during the divorce process, sometimes afterwards.

Tax planning upon divorce is big stuff. Consider the following examples:

  1. You need to withdraw money from your retirement assets, because you need more money as a result of your divorce. Guess what? If you are under the age of 59 ½, there is a good chance you will not only pay taxes but also pay a 10% penalty. So, if you take out $100,000, and if you are in a 39% tax bracket, once you add the 10% penalty, 49% of your withdrawal goes to the government.
  2. You receive alimony. Or you pay alimony. You want to get it lump sum. Or you want to pay it out lump sum. The tax issues there are rampant.
  3. You just got divorced. You pay alimony. You pay a mortgage. You need to discuss taxes! You are in deduction city. There may also be issues of dependency deductions, changing your deductions from your pay to increase your take-home, and so many more issues.

Tax-related issues – like those outlined in this quick reference guide distributed by the American Institute of CPAs – are almost always present both during and after the divorce process. Your highly experienced divorce attorney is there to spot issues for you and to recommend that you see a knowledgeable professional to help you move forward. Schedule a consultation today!