Divorce and Taxes
The words divorce and taxes and not typically used in the same sentence. By this I mean, those divorcing are not typically thinking about taxes. They are lucky to be able to get through a day and function… If you are divorcing consider this, the IRS will consider you divorced if you are divorced anytime during the calendar year. So, if you divorced on January 2, 2015 or December 22, 2015, the IRS considers you as single. Filing as single you will likely pay more taxes than when you filed as married filing jointly (when you were married). This means, you will likely owe taxes in April of 2016. This type of surprise tax bill can throw your finances into a tizzy.
So, what should you do about this additional tax? You have two options:
- Have a CPA calculate the amount of taxes you have both under withheld and pay that from marital funds before the funds are divided and the divorce is final.
- Have a CPA calculate the additional taxes you will both pay if the divorce is final this year vs. waiting until early January 2016. Is it really worth that amount of money to get divorced in 2015? I typically bring up this scenario this time of year when client's divorce will likely be final in October, November or December. One option would be to agree on a settlement, have the document drafted,signed and have it filed with the court in early January 2016.
Husband's and wife's get divorced every day. They rarely get a financially smart divorce because they have not been divorced before and don't know to avoid the financial quagmires.