Florida residents that are thinking about or currently experiencing their own divorce may be interested to learn of a recent article concerning some of the possible tax implications of divorce. According to its author, continuing to mix finances even after separation can be tempting given the possible complexities involved in extricating them from one another, but this could also cause a great deal of problems in some cases. To emphasize his point, he presents the example of a man who was taken advantage of by his former spouse during tax season.
The man had recently divorced his wife after 18 years of marriage. However, they continued to maintain their jointly owned bank accounts with Harborstone Federal Credit Union and Washington Mutual after the divorce, presumably out of convenience. As had been their custom, he provided her with his tax information with the expectation that she would accurately file on his behalf. Instead, she reduced his reported income by $3,000, increased his withholding by $3,000 and kept the refund for herself. In addition, she had ING issue checks worth just over $37,000 to her bank account, which came out of her former husband’s individual retirement account. When he later contested the issue, he was able to recuperate some of his damages, but the Tax Court emphasized that it was unreasonable of him to trust her with his finances.
Asset valuation is generally one of the most important issues involved in any divorce. Complex asset division involving retirement plans, 401(k)s, pensions and other property interests may seem complicated, but it may be a necessary step toward ensuring fiscal independence for both parties after their separation.
As the man in the author’s story undoubtedly discovered, continuing to mix one’s assets after divorce can be quite problematic, and some courts may not look upon such actions favorably if something goes wrong. In addition to aiding in the distribution of property, an attorney may be able to assist former couples in unlinking their finances and preparing for independent tax filings so that they may avoid similar obstacles.
Source: Forbes, “Post Divorce Tax Intimacy Can Be Riskier Than Post Divorce Sex“, Peter J. Reilly, January 07, 2014