Are you getting an amicable divorce? While you may have a number of things to work out right now, one item that should be on your agenda is a consultation with a tax preparer. What can they help you both with? Here are a few key things.
1. Determining How to Split Credits.
For parents in particular, the use of tax credits and deductions can mean significant money. The Child Tax Credit, dependent deductions, and education credits all add up, and both parents need to come to an agreement about how they will be split our used from year to year.
2. Understanding Retirement Account Taxes.
Retirement funds have different tax consequences depending on the types of accounts and how withdrawals are made. If you simply divide these based on the current dollar values, you both may not end up with equal amounts in the long run. A traditional IRA and a Roth IRA, for instance, will have vastly different tax implications that need to be taken into consideration.
3. Completing Joint or Individual Returns.
In the year (or years) in which the divorce is not yet finalized, you should seek professional assistance filing your tax returns as a couple. Some couples find that a third party can help make joint tax return filing easier, and this is often more advantageous for both parties. However, a tax consulting service can also help you decide if you should file separately.
4. Avoiding Taxes on Capital Asset Sales.
If you will sell the marital home or any other asset incident to divorce, you'll want to avoid unnecessary taxation. The rules regarding how to do so can be complex, so you want assistance from someone who understands the IRS guidelines.
5. Preparing Documentation.
The divorce process often requires a lot of paperwork regarding your family finances. Your tax preparer can help put together past tax returns, assist in documenting expenses for your marital home's value basis, and preparing reports for income and expenses of a family business. They can also ensure that both parties have the documents they need on their own going forward.
Clearly, a qualified tax preparer can help in many ways as you and your spouse navigate your amicable divorce. By working together to understand your financial picture and make decisions about how to split your assets and obligations, you both raise your chances of a successful and stress-free divorce. Get started today by consulting with a tax preparation service in your state today.