Preparing tax returns for the year of divorce can be challenging. Professional help and consistent filing with your ex-spouse is key to avoiding IRS issues. In order to navigate preparation of your 2015 tax returns, start by reviewing your marital settlement agreement (MSA) and consider these tax tips for the newly divorced:
1. Filing status – if you were divorced as of December 31, your options are to file as single or head of household; filing jointly is not an option.
2. Did you sign an Income Reclassification Agreement? If so, you will report your separate income, deductions and withholdings for the year. If not, you will need to allocate marital income, deductions and withholdings between you and your former spouse from January 1st through the date of divorce.
3. Dependent exemption – if you have minor children, your MSA should indicate which parent is claiming which children. If your agreement does not specify, you need to address this with your former spouse to avoid both claiming the same child. Use form 8332.
4. Check with your attorney to see if any of the legal fees you paid are tax deductible.
5. If you use flexible spending accounts, make sure you qualify for the child care credit or other pre-tax items which are tied to the dependents you are allocated per your MSA.
6. Make sure you know the tax cost basis in the assets allocated to you as part of your divorce settlement.
7. Be certain you understand the tax impact of payments you are receiving or paying, including maintenance/alimony, to assure proper estimated payments and reporting.
8. Use a CPA who has experience and expertise in divorce tax issues.
Finally, start gathering your tax information early! You can avoid issues with proper preparation and a knowledgeable tax preparer.
Gaylene A Stingl, MST, CPA, CVA
Gaylene is a principal with Blau-Himmel LLC, providing tax, business valuation and litigation support services. Gaylene has worked with divorcing couples for over 20 years, providing cost effective, creative solutions to individuals and transitioning families.
This past year, the United States Supreme Court held in Obergefell v. Hodges that every state must grant and recognize same-sex marriage. While a majority of our country is celebrating our country’s progress, with gay marriage also comes gay divorce.
Prior to the whirlwind of case law between 2014 and 2015, a Wisconsin court could not grant a divorce to a same-sex couple as the underlying marriage requirement was nonexistent. LGBT couples could be recognized as domestic partners and the courts had the power to terminate such partnerships. Wisconsin’s marital law did not apply, however, and LGBT couples had only equitable doctrines to rely on for property division.
With this new power to grant marriages to same-sex couples, the application of Wisconsin’s Family Code to a gay divorce becomes a complicated task for attorneys let alone the couple on their own. For a court to grant a divorce, couples must disclose all assets, debts, and income and allocate all marital property. Wisconsin’s Family Code takes into account various presumptions and factors in determining and allocating divisible property, such as length of marriage, gifts and inheritances, and contributions to the marriage. But, the difficulty with a same-sex marriage in Wisconsin is determining at what point the couple is ‘married.’ Is it the day the Wisconsin Supreme Court held it unconstitutional to deny same-sex marriage? Is it the day the U.S. Supreme Court held same? Or is it the day the couple legally married in another state even though the marriage was not recognized in Wisconsin yet? Without prior case law on determining dates of ‘marriage,’ allocating marital property in a gay divorce becomes an uncertain task and can lead to costly attorney fees, frustrating time in court, and high levels of stress.
The Family Mediation Center is a positive approach to resolving all issues required by the court with minimum conflict and cost. The lawyer mediator will guide the couple through the issues and steps in obtaining court approval and team members, including financial specialists and family/child specialists, further assist with helping the couple develop a parenting plan and allocate complex assets including business interests. The Family Mediation Center is an option for LGBT couples looking for a cooperative approach to Wisconsin’s new same-sex marriage law to create and implement their own divorce agreement.
Our children are our greatest assets and there is no time when we are more concerned about their interests than when a family is going through divorce. Divorce is a life experience that doesn’t present itself often and, as a result, it is sometimes difficult to know how to handle the process, especially when children are involved. Separating and staying co-parents is challenging. A child specialist may assist you in navigating the process and help you work together with your child’s other parent to make decisions and plan for the future.
A child specialist will help you look at divorce through the eyes of your child and be able to help you understand how children of different ages and different temperaments approach parental separation and divorce. Your child specialist can help you frame how you want to present the divorce decision to your children and assist you to better understand your changing role and responsibilities as a co-parent living in a different household.
The Court expects that you and your child’s other parent will prepare a parenting plan that outlines how you will handle the tasks of parenting in a way that delineates how decisions will be made, where the child will spend time, and how you will manage some of the challenges of divorced life such information sharing, holidays and adding new family members. All of these aspects of divorce will be a part of your conversations with your child specialist.
The child specialist can meet with your child and ensure that their voice is heard in the process. Getting feedback from a trained professional who understands children, your unique family situation and divorce can be invaluable in preparing you to write your parenting plan.
I hope that you see the value of working with professionals who have training in family systems and child development as you move through your divorce.
You may divorce, but you are still a family!
Jeanne Schroeder, Ph.D.
Dr. Jeanne Schroeder is an Individual Therapist, Mediator, Child Specialist, and Coach with In Focus Counseling. She works with clients who are facing challenging circumstances, strong emotions, and a sense of uncertainty to help them adapt to life-changing events and stressful situations.
Mediation means one attorney for both sides: Representing both spouses would be unethical. The mediator is neutral and does not represent either spouse. The mediator will provide education and guidance to assist the couple in building their final resolution. However, the mediator cannot give legal advice and does not appear in court.
A Mediator won’t tell me anything about the law that I can’t find on the internet: The law is complex and can be interpreted in different ways. It is important to understand current impact and discuss future consequences. Opinions and articles on the internet are not always accurate and do not delineate the differences in state laws. A Wisconsin lawyer mediator can explain the law, support fully informed decisions and assure proper steps are taken to implement legal agreements.
A Mediator will decide for us if we cannot agree: The mediator cannot tell you what to do or make decisions for you—only a judge or arbitrator can do that.
Couples with a high net worth or financial complexities do not benefit from using Mediation: Though couples with a high net worth can afford litigation, they may actually benefit more from mediation. Mediation can involve a neutral financial specialist to help jointly address values, tax effect and allocation options for assets and income. This helps both parties understand and discuss financial settlement options rather than hiring separate lawyers and dueling financial experts to fight over values and final divisions in court.
Mediation will not work for couples who disagree on issues: The only issue the couple must agree on is a resolution to educate themselves and commit to mutual communication and joint effort to resolve issues outside of court.
I’ll settle for less than I’m entitled if I don’t have an attorney: What each is ‘entitled to’ varies depending on different interpretations of the law. Mediation helps spouses reflect on and satisfy their needs and interests rather than focusing on entitlements/positions that distract from their end-goal.
Mediation is always the best process: Mediation is not appropriate for all cases. High conflict, mental health issues or refusal to participate in full disclosure may prevent productive outcomes in mediation. Mediation is a voluntary process. If either of you decides that mediation is not working for any reason, you always have the option stop mediation and pursue a traditional divorce process.
Divorce can be a complex and emotionally challenging process. Decision-making is stressful and emotions run high. It is important to remember that your actions throughout this process can not only affect your final settlement agreement, but also affect your family relationships. Rather than having regrets, below are some helpful tips during this time:
• Do be reasonable and cooperative in decision-making. Respectful communication will lead to creative and positive options.
• Do follow all temporary court orders or agreements. It will help to ease conflict.
• Do confer with your spouse before selling or giving away property.
• Do fully disclose all assets and debts.
• Do support your children. Changing family dynamics is difficult for adult children as well as minor children.
• Do consider consulting with a child specialist to help keep a positive focus on their needs and interests.
• Do be upfront about your needs and interests. It will help to create options that are in the best interests of the entire family.
• Do take care of your physical, emotional and mental health. See a therapist if you need assistance.
• Do understand all of your process options. A court litigated approach is not the only way. Call us to learn more about mediation with the Milwaukee Mediation Center
• Don’t lash out at your spouse or react negatively to their actions, especially around your children. Give yourself time before making major decisions.
• Don’t violate any temporary court orders or agreements.
• Don’t sell or give away property without your spouse’s mutual agreement.
• Don’t hide assets or withhold income from your spouse.
• Don’t involve significant others in your children’s lives too quickly. It can confuse your children and make them insecure. Introduce new relationships only when you and your children are ready.
• Don’t use your children as a pawn in order to get what you want and don’t make them pick sides.
• Don’t involve adult children in the drama. They are still your children and deserve to be insulated from parental conflict.
• Don’t defer to the past, it cannot be changed. Instead, look forward in deciding how to reshape your family.
• Don’t go it alone. Call us to learn how the Milwaukee Mediation Center can guide you and your spouse through the complexities of a divorce process.
The decision to divorce your spouse has many emotional and financial ramifications and involves many choices. Choosing your process is the first step and then there are many additional decisions you will both need to make. There are likely bank accounts to divide, home ownership and a mortgage balance to deal with, and credit card debt to pay. If you have children, all of their day-to-day needs and activities continue—school work, after-school activities to be driven to, doctor appointments to be made. With a separation, a child placement schedule must be arranged with the other parent.
All of the above decisions have the ability to be an “issue” in the divorce process. With each issue comes the potential of conflict and the decision whether to hire a lawyer. The traditional view of divorce is that it is inevitably adversarial with damaging emotional and financial costs for the family.
It doesn’t have to be that way.
After you have made the decision to divorce, your first step is to become educated about process options. One alternative to the traditional divorce process is mediation. Mediation is a confidential, problem-solving process in which a neutral third party (the lawyer mediator) will help educate and guide both of you through all necessary decisions and documents you need to complete for a divorce or separation. You and your spouse deal with all “issues” outside of the courtroom and retain all decision-making. It’s your family. Divorce should be your process and your resolution.