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The potential tax implications of divorce may soon lessen

by | Jun 11, 2015 | Firm News, Property Division, Property Division |

One might naturally assume that there will be no further problems after the finalization of one’s divorce. While this may often be the case, there are certain situations in which further discussion or cooperation may be necessary. There can be unforeseen tax implications when filing returns with the Franchise Tax Board, even if one thinks tax issues have been addressed in a divorce agreement. The California Senate recently voted, with unanimous approval, on a piece of legislation designed to uphold divorce agreements in relation to tax liabilities.

The California Franchise Tax Board currently does not have the authority to uphold the content of divorce agreements in relation to taxes. SB 526 is intended as a step toward streamlining government processes. At present, those who understood their tax liabilities to have been handled in legal divorce agreements may find that they need to return to court in order to enforce the arrangements. The only other alternative is to pay the amount demanded.

While it would appear that women form the majority of people affected by this situation, it is not dependent upon gender. Tax implications are related to earnings and assets, and either spouse may end up liable for taxes unexpectedly. When one considers that divorce may have been triggered by domestic violence, for example, it is unfair to expect a man or woman to have to revisit a violent marriage for tax purposes.

The next stage for the bill is the State Assembly. Until SB 526 is finalized, California residents may still require additional advice and guidance on tax liability after divorce. Those who are deemed to be absolved of the need to pay tax may still have options available to them in order to avoid unfair tax implications.

Source:, “California Tax Agency Closer to Honoring Divorce Agreements?”, George Runner & Fiona Ma, June 3, 2015


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