Arizona Divorce And Family Law Tax Issues Must Be Considered Year Around By Attorneys and Parties
In dealing with hundreds of divorce and family law cases, parties and even many lawyers often forget to include provisions regarding common tax treatment. These important financial issues should not be overlooked. As the April tax deadline for 2011 is behind us, we must nonetheless continue to look at 2012 and future tax years in all settlement and trials.
The most common issues is the claiming of the children for tax exemptions. Under the federal Internal Revenue Service (IRS) rules, the parent with whom the child resides the greater part of the year is entitled to claim the child as a general rule. The Federal IRS rules do, however, allow for the State Court divorce judge to make a different allocation. Under Arizona family law, the statute requires that in most cases the Judge must divide the claiming of the children proportionate to income. As far as the IRS goes, this is taken care of by the use of form 8332 which can be found online or obtained through a tax preparer.
It is to the benefit of both parties to consider who will benefit most from the tax exemption. In some cases in which one party will receive a substantially greater advantage than the other party, one party can be permitted to claim the child every year in exchange for an increase or decrease in child support. This would be done by agreement of the parties and should be included in an Order signed by the Court.
Another common issue is whether to file jointly or separately. It is often financially advantageous to file jointly, though in high conflict cases the difficulty in working together toward a common goal may outweigh the financial advantage. The total tax return can be divided equally in some cases. In other cases, it is more fair to calculate the two returns separately, and then determine how to split the incremental increase in the refund if the parties file jointly. Talk with your tax preparer or CPA regarding filing jointly or separately, and work with your divorce or family law attorney to ensure that your agreement is written in such a way to maximize your tax benefit.
There are tax advantages to being able to file as the head of household. Generally this can be claimed by the parent with the child the majority of the time. If divorcing couples have more than one child, they may each be able to claim at least one child as the head of household. This should be reviewed by your tax preparer or CPA, and worked through with your divorce and family law attorney.
In some cases, it may be advantageous to file single, rather than married filing separately. Even if your divorce case has not concluded, there are specific rules that when applicable may allow a party to file a single. These rules include maintaining a separate residence for all of the past six months of the taxable year, and maintaining over half of the cost of maintaining the home. You should work through these issues with your tax preparer or CPA, and work with your divorce lawyer to ensure that any agreements or court orders permit you to file as you have been advised by your tax professional.
Because the tax issues can be complex, you should ensure that you work with an experienced family law attorney or divorce lawyer. If you are involved in a divorce or custody case, and are looking for experienced representation involving tax issues or other complex issues, please call 800 899-2730 and ask to speak with attorney Douglas C. Gardner, or visit our website at www.yourarizonadivorcelawyer.com.