Helping Divorce Clients During Tax Season
It is that time of year again – the tax filing deadline is looming. While everyone is busy gathering their information and meeting with their accountants to file on time, those who are going through a divorce have additional hurdles to overcome. They often have uncertainty about their filing status and they may not have access to the pertinent information needed to complete their return. They may not know whether they are permitted to take their children as a child tax credit, or know the extent of their charitable deductions. But most importantly, they are questioning where they will get the money to pay taxes that are due.
What role do divorce attorneys play during tax season?
As divorce attorneys, our clients immediately turn to us to advise and guide them through this stressful time. Given that most lawyers are not tax professionals, we don’t always have the answers to specific tax questions that clients are seeking. Nonetheless, it often falls on us to help our clients navigate this difficult situation to achieve the best possible outcome, and to be compliant with all requirements and relevant deadlines. As such, we often find ourselves gathering our own resources to make sure that our clients get the information needed to meet their tax obligations.
Negotiating between uncooperative parties
Lawyers who are not CPAs are wise to steer clear of giving specific tax advice, instead directing their clients to consult with an accounting professional to deal with the mechanics of the actual tax return. Where we often get involved and where our expertise is most needed is to advise clients whether, for example, there is an agreement that permits them to take a child tax credit (as opposed to their spouse) or to help negotiate their filing status (i.e. joint or married filing separately) when there is a disagreement with their spouse as to how they will file their tax return.
Clients are often surprised to learn that they cannot compel their spouse to file their return in a certain manner; so frequently, we are counseling our own clients on what is and what is not possible when their spouse is being uncooperative. Because there is often a lack of trust between divorcing parties, sometimes an indemnification agreement is warranted especially when a client is uncertain of their spouse’s income or whether he or she is taking the proper deductions, etc. Thus, we are often tasked with drafting these agreements and negotiating them in advance of the tax deadline.
We can also assist clients in obtaining the information needed to complete their return especially when their spouse is not sharing critical documents. At times we interface with the client’s tax preparer to communicate relevant information including any agreements that may be in place that will affect the tax return. Finally, and probably where our assistance is most needed, is in negotiating with the other side as to how and from what source any tax liability will be paid.
Focus on support
Tax time is a stressful time for everyone, but it is often even more so for those going through a divorce (and for the lawyers representing them). While we cannot assist with the actual preparation of the tax return, we nonetheless often have an important role to serve. We are there to support our clients and assist them in various possible avenues to make the tax filing process as smooth and uneventful as possible.
And of course when the deadline comes and the taxes are filed, we all breathe a sigh of relief and put these tax issues out of our minds for another year.