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Mark Abzug

Is your spouse hiding assets by overpaying taxes?

On Behalf of | Oct 9, 2023 | High Asset Divorce

Some divorces get own and dirty, with one or both parties playing dirty tricks and slinging mud. Typically, the two most hotly contested issues in the split are custody of the minor children and division of assets.

No one wants to pay more income taxes than they must. Or do they? For some divorcing spouses, overpaying one’s taxes is a way to appear to diminish marital assets while still preserving their financial interest.

Who is more likely to attempt this?

This underhanded divorce tactic is more frequently tried by wealthier spouses. After all, they must have the means to make large overpayments to the Internal Revenue Service (IRS) in the first place, as well as a tax bill to justify a costly overpayment.

Same scheme, different version

Overpaying creditors of all kinds is another way this trick plays out. But there are drawbacks, as large overpayments create problems on the creditors’ end with their own bookkeeping. Also, legitimate business entities want no liability from getting dragged into a client’s divorce drama.

Signs of overpayment of taxes

Divorcing spouses frequently continue to file jointly to take full advantage of all the government’s tax breaks for married couples. They will only file separately once it’s no longer legal to file jointly. If you and your spouse have not yet divorced, be wary of a sudden urge on their part to file their federal taxes separately.

Loss of liquidity

This scheme takes time to play itself out. If your soon-to-be ex-spouse is suddenly cash-poor for no logical reason, they may be hiding assets through overpayment of taxes or other bills. You should address this with the Florida family law courts immediately to prevent your marital assets from being converted into separate property or dissipated entirely.