Are you getting divorced? While you both have many things to think about and plan right now, one task that should be on both parties' to-do list is to meet with a tax preparer. In fact, this must-do item shouldn't even wait until you file taxes in the spring. Why? Here are four important ways an accountant can help you both now.
1. To Prepare Old Taxes
Before entering into divorce negotiations, every couple should ensure that their current and back taxes have been properly filed. Why? First, it clears up all your old obligations as a couple and prevents you from having to get together later in any awkward or emotional shared tasks. Second, complete records are necessary for accurate divorce negotiations, so you should know all your obligations and financial standing.
2. To Plan Current Shared Taxes
Informal separation, legal separation, and legal divorce all have different effects on your income taxes as a couple and individually. Meet with a tax preparer to learn about things like when you can (or must) file jointly or separately, how to divide up dependents and tax deductions, and what to do if you disagree about your tax filing.
3. To Learn About Property Division
The financial consequences of property and debt division during divorce can last for years. Most people getting divorced don't fully understand how taxes can be affected by various choices, so they need professional consultation. For instance, the tax effects of dividing a Roth IRA are different than dividing a traditional IRA of the same amount. The disposition of the family home after divorce could also raise or lower taxes based on who lives in it, when it's sold, and how much it has appreciated.
4. To Plan Future Taxes
Finally, each spouse should meet separately with a tax preparer to learn about changes to their income taxes as single individuals. Many changes will become permanent, including going from multiple incomes to a single income household, sharing or losing dependent deductions, and using different filing statuses. Both spouses can meet with the same tax preparer if all parties feel comfortable with it.
Clearly, an experienced tax preparer or accountant should be part of your divorce consultation team. As a couple, it helps you wind up your shared responsibilities. And as individuals, you learn what you need to know to minimize taxes and expense later on. Learn more about taxes and divorce by making an appointment with a tax preparation service today.