When someone in Texas has taxable earned or unearned income, the federal and local agencies seek to collect what is due. Someone entering into divorce proceedings might find previously complicated tax issues are more challenging to figure out. People may make mistakes when making tax-related decisions, which may lead to possible audits and bigger tax bills.
Choosing the appropriate filing status might be wise. Until the divorce becomes finalized, the spouses are legally married. However, “married filing jointly” is not the only filing status option available. “Married filing separately” is the other. Speaking with a tax professional about the differences, benefits, and drawbacks regarding the two filing status’ could clarify matters.
Not every divorce involves a bitter trial. Many spouses prefer to separate amicably, and negotiating an out-of-court divorce settlement helps move things in a less stressful, less costly direction. Some may prefer to divide assets in the simplest manner possible. One way to do so may entail one spouse taking the IRA and the other spouse taking the Roth IRA. Here is where one spouse may end up with a higher tax bill, as the taxation on IRA distributions is not the same as Roth IRA distributions. Lack of familiarity with these and other tax rules could have financial repercussions.
Were there losses to report on business income or capital gains? If so, the losses may affect the overall tax due. Are these legitimate losses being reported? And are all legitimate deductions finding their way to the tax forms? A spouse who previously did not handle tax filings may now need to find answers to such questions.
The custodial parent also receives an exemption amount for any children. Is that exemption being taken?
Divorce could lead to many questions about asset division, taxes, child custody, and more. That is why so many divorcing spouses rely on an attorney during proceedings.