A full accounting as a marriage ends

Dealing with tax issues during a separation and divorce can be stressful and emotional, but addressing them early and logically can benefit both spouses and the family as a whole. The federal tax code has rules specifically for divorcing couples to address the practical concerns involved during and after a separation. It is almost always in everyone's best interest to file jointly if the couple was married at the end of the calendar year, according to Maureen Glackin, a family law attorney with Reinstein, Glackin, Patterson & Herroitt LLC. "I always tell my clients, 'Go to your tax preparer and have them run two returns" to show the difference between filing as a married couple or married filing separately, Glackin said. If one or both parties had wages withheld based on the understanding they would be filing jointly, filing separately at the last minute can leave someone with a huge tax liability, according to Glackin. Once a decision is reached about how the couple will file their taxes, attorneys should address how any refund or obligation should be distributed, Glackin said. "It's important as you come to the end of the tax year to talk to opposing counsel," she said, noting the lawyers should be aware of the emotional state of both parties. Divorcing couples can get caught up in making sure their spouse doesn't get what they perceive as a benefit, she said, which can be everything from a tax refund to certain deductions permitted for the custodial parent or person paying the mortgage. Glackin said she emphasizes making choices that will maximize money for the family. "In a perfect world, divorcing spouses would think practically and not in a retaliatory fashion," she said. Deduction decisions The child dependency exemption is an offset for a parent who has custody of minor children but can be waived and shifted to the other parent, Glackin said. A form is available for the custodial parent to waive his or her right to the exemption, which may be the more logical choice if he or she is not the higher wage earner in the family, she said. When the parties were together and taking the exemption, there was no problem, Glackin said, but during a divorce it becomes "something to win over on the other side." The exemption phases out after certain income levels, according to Glackin, so sometimes it may be better for the spouse with a lower income to take the exemption or else it will be forfeited. The deductions for payments toward mortgage interest can also be shifted between the parties, according to Glackin. The default is that the person who pays the mortgage takes the deduction if there is no agreement otherwise. Emotions can also run high in discussions about this deduction because at the center is the family home that one spouse has left, Glackin said. But it can also be a negotiating tool. If the high-wage earner has left the house and his or her spouse remains, the deduction can be shifted to the low-wage earner as a benefit in lieu of alimony, which he or she would pay taxes on, Glackin said. Ethical obligations Attorneys have an ethical obligation to have these conversations with their clients and attempt to negotiate with the opposing party. "You can, within the tax laws, fashion an agreement that will benefit both parties and benefit the family as a whole," she said. If an attorney is uncertain about the options available for a client, the attorney should refer the client to an accountant, Glackin said, calling it "essential" to have an accountant to contact with questions. Not only will the accountant's fee be less than paying the attorney to research tax law, but an accountant can also explain options better to clients. "From a cost perspective for the client, the tax accountant is way cheaper than me," she said. Published: Wed, Apr 06, 2016