As April 15th rapidly approaches, our domestic clients naturally have a lot of questions regarding the preparation of their tax returns. Since I am not (for better or for worse) an accountant, I always suggest that those clients of mine who are in the process of a divorce engage an accountant or other tax professional to answer these questions.
When consulting with a tax professional, some issues a divorce client may want to explore at tax time include:
1. Whether it will be more beneficial for the parties to file jointly or for each party to file married filing separately;
2. Which party will most benefit from deducting any mortgage interest paid during the given taxable year;
3. Who will most benefit from claiming any minor children as dependents;
4. The treatment of spousal support payments made or received during a given taxable year; and
5. The treatment of child support payments made or received during a given taxable year.
While there are inflexible rules and regulations addressing some of these issues (such as the need to include spousal support received as income and the ability to deduct spousal support paid from income), the relevant law concerning others is such that some of these issues may be negotiated between the parties (such as who will claim the minor children as dependents) to the benefit of both. A savvy domestic client will work with his or her attorney and accountant come tax time.