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:
- 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.
- 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.
- 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!