Naperville Divorce Attorneys
Tax season has come and gone yet again. For those of us that have relatively straightforward taxes that do not change significantly from year to year (or for those of us that utilize accountants), this may not usually be a big deal. However, even if you are using the services of an accountant to advise you, significant changes in your income, assets, or marital status may drastically affect your taxes, deductions, and losses, and require the assistance of a knowledgeable Naperville divorce attorney.
Divorcing Couples and Tax Season
The first question most couples going through divorce proceedings want to address is whether they should file as a married couple. As is the answer to most legal questions: it depends. Your marital status for tax purposes is determined by your marital status on the last day of the tax year. So, for example, your 2015 tax marital status depends on whether you were married or divorced as of December 31, 2015. Even if you are divorced or going through a divorce now, you were still legally married for tax purposes on the last day of December 2015.
Some married couples choose not to file joint tax returns during the course of the marriage. Whether this is prudent depends on the assets and value involved in the marriage, whether there are any businesses to consider, and whether the tax consequences benefit/hinder you for filing either individually or separate. Whether your tax status should change while you are divorcing is a separate question that is dependent entirely upon a couple’s unique circumstances. General property transfers between husband and wife or divorcing couples are not generally taxable, but this can get tricky when the assets are only in one spouse’s name but are still considered marital property for the purposes of property division.
When you divorce, you are generally entitled to marital property from the marriage. Marital property, under Illinois law, includes virtually every asset, income, account, stock, retirement fund, personal property, business equity, or real property obtained during the course of the marriage, even if it is only listed in one person’s name. When divorcing, this property is typically to be equitably divided between the parties (absent a prenuptial or other agreement to the contrary) and will change the manner in which this property is taxed, if at all.
Underreporting or failure to report information on your taxes is not only criminal, but it can cause difficulty in ascertaining the amount of marital property to be divided upon divorce. There are attorneys that focus on how to ensure that there are no hidden assets and that their clients receive every penny they are entitled to. If hidden assets are discovered, the penalties for the accused may be significant, in addition to the fact that the property will generally need to be divided alongside the other (known) marital property.
Transferring Assets and High-Net Worth Couples
Married, divorced, or getting divorced, transferring assets can have significant tax implications that should be considered before taking action. Some of the most significant monetary transfers during divorce include:
- Sale of the marital home;
- Sale of commercial or investment properties;
- Sale of stocks, bonds, and other investments;
- Division of equity in a business (note that divorcing couples in a business venture that choose to sell as opposed to one spouse buying out the other or maintaining their interest will generally require a business valuation); and
- Division of retirement accounts (note that there may be special tax penalties applied to money taken from accounts earlier than allowable).
Additionally, high-net worth divorces, especially, involve couples with a high standard of living. This standard is the standard by which child support, spousal support, and other property divisions are generally based upon. Thus, regardless of whether you are the one attempting to protect your assets from your spouse or the spouse trying to recover the assets you are entitled to, thinking through all of the possible tax consequences of your divorce settlement is the best way to ensure your assets are protected and that you receive the property to which you are entitled.
Naperville, Illinois Divorce Attorneys
Our skilled DuPage County divorce attorneys at Sullivan Taylor, Gumina & Palmer, P.C. have the collective experience necessary to ensure that every tax consequence of your divorce and division of marital property is thoroughly explored and identified. We understand that taxes are stressful, especially when coupled with an ongoing divorce. We strive to help our clients understand what a change in tax status means, how they should file to get the most out of their deductions, and how to ensure they are in compliance with state and federal law while doing so. To learn more about how your taxes will change when you are filing for divorce, contact our DuPage County family law attorneys today at 630-756-5112.