Taxes And Divorce – Part 5

Help Your Client Help Themselves

If you as a tax professional get the opportunity to advise your client before all the I’s are dotted and T’s crossed at the courthouse, here are some things you can do to help:

1. Based on the desired outcome for child custody, have a Form 8332 already prepared for you clients attorney to present for signature at the time of the court appearance.
2. If there will be a distribution from a qualified retirement account, make sure the QDRO is drawn up in the most tax beneficial manner.
3. If there is to be separate maintenance or support make sure the order is drawn up in the most tax beneficial manner for your client.
4. Review state issues with your client.
5. If there is to be a division of business or investment property make sure the order is drawn up in the most tax beneficial manner to your client
6. Liaise with the local Bar Associations, courthouse administrators, and child protective service offices to get them the information to help their clients make a better decision (and maybe refer some clients to you as well).

As with all things taxes, there is a short term outlook and a long term outlook when dealing with a divorcing couple. Unfortunately, emotions may play a big role in the determinations as well. You should be able to advise your client as to both outlooks from a non-emotional financial and non-financial aspect.

What may be good for your client in the short term, getting a large amount of alimony as opposed to child support, for example, may be bad in the long run as it may increase the clients AGI disproportionally during future years.

Getting a large chunk of the monthly support payment ordered as child support instead of alimony may cause real world parenting issues in the future or the reverse since, alimony may be more long term and child support usually ends when the child leaves school.

Getting the house in the divorce may seem like a win, but if you also inherit the mortgage that is under water you may not only lose the house in the long run but may have cancellation of debt to worry about later.

These are just some of the things we need to think about with our clients when they are going through this difficult time in their lives. Emotions tend to make our clients let the “tax tail” wag their financial “dog”. Don’t let that happen to your client. Be their tax adviser as well as their tax professional.


In accordance with Circular 230 Disclosure

Anything and everything taxes. I also write the Louisiana State book to go to our new Income Tax Course learners and the state-wide training for upper level Tax Professionals. I am an Instructor of all levels of tax related classes. I love to teach and write as well as taking the absolute best care of my clients all year round.

26 years in Law Enforcement (13 in the Air Force and 13 at the Bossier City PD), 20 years doing income taxes professionally.
My goals now are to spend many years being my 3 grandchildren’s MeeMaw, taking the absolute best care of my clients, and continually learning new things.
Taxes! I specialize in military, states, small business, and rentals.
The postings made on this site are my own and do not necessarily represent HR Block’s positions, strategies or opinions.

Facebook Twitter LinkedIn 

Subscribe to TaxConnections Blog

Enter your email address to subscribe to this blog and receive notifications of new posts by email.