When you divorce you will be subject to a new set of rules when filing taxes. Understanding the rules governing tax in relation to divorce will help you make the best decision during your divorce process. This excellent article by Rebecca Siggers outlines how divorce changes your tax obligations. The divorce process gives you enough stress, and you do not want the IRS to come for uncleared taxes at your doorstep. The Date You Legally Divorce. Your marital status on December

Divorce itself is an emotionally charged, troubling process. When you add major financial decisions to the mix it can create a recipe for disaster. A large portion of many divorce settlements I help with involve retirement plans. Per the Investment Company Institute, as of December 31, 2018, 401(k) plans held an estimated $5.2 trillion in assets and represented 19 percent of the $27.1 trillion in US retirement assets. So, it’s no surprise that retirement plans hold a large p

Valuing and dividing retirement accounts is more complex than most divorcing couples expect. In this excellent blog posting, the Divorce Strategies Group offers the answers to five common questions regarding retirement accounts. Can a retirement account be divided without triggering taxes? Is a retirement plan more or less valuable when compared to other assets? Is a retirement account separate property? Can you avoid the IRS penalty for early withdrawal in divorce? Should yo

One of the givens for divorcing couples in the United States has always been the alimony is deducted from the payor’s income and includible in the recipient’s income for purposes of federal taxes. As James Nunn writes in this excellent blog posting, this structure provided some relief by way of a tax break for divorcing couples who would have to use the money that previously supported one household to support two separate households after a divorce. This worked because the re

As I've written previously, the Tax Cuts and Jobs Act of 2017 (TCJA) that took effect in January has added a new urgency for wealthy Americans contemplating divorce. In this Wealth Matters article in the New York Times, Paul Sullivan writes that several key changes in the law may determine whether it is better to complete or update a divorce agreement by Dec. 31 or wait until the new year. One of the biggest changes affects alimony, which will not be a tax break for Americans

Divorces are difficult, but add to them the stress of trying to understand tax law, and the road ahead looks even darker. One bright spot in the pre-2018 tax laws was that a tax benefit existed in cases involving alimony. Under the IRS tax rules before 2018, alimony was tax deductible to the payor, while being taxable to the recipient. But this has changed under the most sweeping federal tax code overhaul in decades, the Tax Cuts and Jobs Act of 2017 (TCJA). Alimony and Taxes

Amidst the various changes in the new tax law is an almost unnoticed change in the tax brackets for different filing status'. The so-called marriage penalty has been virtually eliminated from the tax brackets. At the same time the cost of married filing separately is much lower than previously but some old rules remain to challenge us to plan carefully. These and other changes have widespread implications for how divorce will be negotiated. The effect of the new tax law c

While much has been made of the changes to alimony, there are plenty of other changes that will impact the negotiation of divorce settlements. The new tax reform act impacts almost everyone; however, it contains some significant provisions that impact families going through divorce. In this excellent blog posting, Michael Wayland discusses how the new law will impact how couples, mediators, lawyers, and courts look at the financial issues involved in divorce. Tax Status - Oft

In this excellent blog posting, Meredith Richardson interviews Financial Planner Jill Boynton on some of the impacts of the 2017 tax law changes on divorcing couples. Alimony - beginning January 1, 2019, for any alimony orders issued from that date forward, the tax burden for alimony will no longer shift from the payer to the recipient. Instead, it will remain with the payer, who is often in a higher tax bracket than the recipient. The new law could mean that the payer can’t

The new tax plan eliminates the tax deduction for alimony payments. Under current law, alimony is deductible to the spouse making payments and is included as income to the recipient. In the new bill, however, these payments are no longer deductible for the payor. Nor are the payments included in the recipient's gross income. Instead, the money used for alimony will be taxed at the payor's rates. The alimony deduction repeal would affect divorces carried out after December 31

Filing taxes is a reality that adults across the United States face each year. For many, it can feel like a painful task. However, filing taxes can be much more complicated and stressful when paired with a recent divorce or separation. Before you get started, this blog posting offers 4 points you should know about divorce and taxes. Know your filing status. Figure out who can claim the children. Consider the difference between child support and spousal support. Get help from

If you divorced in 2015, there are a few important things to be aware of in order to avoid potential hassles. Robert Bordet offers this quick cheat sheet: Know your filing status. Review your settlement agreement in order to determine who can claim the children as exemptions. Ensure you have an IRS form 8332 signed, if required. Determine the amount of your withholdings on your form W4. Ensure you’ve done estimated payments if your withholding is not enough, or if you’re re