When couples are married, they may discuss many topics regarding their relationship. The number of children each spouse would like and the neighborhood in which they would like to live may come high on the list, but it may come as a surprise to learn that finance is a subject often overlooked. In a community property state such as California, financial responsibilities do not lie solely with the spouse who incurs them, and the tax implications can come as an unwelcome shock during tax season both during and following divorce.
It may be quite common for one spouse to shoulder the management of the family finances; however, the other spouse should ensure that he or she understands the full extent of any debts that are accrued. Tax returns for married couples may be filed jointly or individually, but the level of liability that each spouse retains is unaltered. In extreme cases, one may find that a spouse has been committing financial fraud before filing for divorce, leaving the other spouse facing the consequences from the IRS or other debtors alone.
It may be possible, with the appropriate financial advice, to reduce the impact or indemnify oneself against such occurrences. Even if one finds that they are already facing the repercussions of such actions, there are various ways in which one can extract himself or herself from the financial quagmire. In any event, the process will require a thorough understanding and knowledge of the whole financial picture as it relates to both parties.
Tax season is a good time to get a handle on financial affairs, particularly if one is considering the commencement of divorce proceedings. Doing so may assist California residents greatly in their attempts to avoid potentially devastating problems with unforeseen tax implications. Advice that is appropriate to one’s own circumstances is necessary in order to ensure the best possible outcome that allows one to move forward into his or her new life in a positive manner.
Source: mainstreet.com, “How to Minimize the Impact of a Divorce On Your Current Taxes“, Ellen Chang, April 13, 2015