Divorces, Name Changes and Tax Information

The come from Five Filing Facts for Recently Married or Divorced Taxpayers at International Tax Counselors Blog :

Here are five facts from the IRS for recently married or divorced taxpayers. Following these steps will help avoid problems when you file your tax return.

1. If you took your spouse’s last name or if both spouses hyphenate their last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security Number.
2. If you were recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.
3. Informing the SSA of a name change is a snap; you’ll just need to file a Form SS-5, Application for a Social Security Card at your local SSA office.
4. Form SS-5 is available on SSA’s Web site at www.socialsecurity.gov, by calling 800-772-1213 or at local offices. It usually takes about two weeks to have the change verified.
5. If you adopted your spouse’s children after getting married, you’ll want to make sure the children have an SSN. Taxpayers must provide an SSN for each dependent claimed on a tax return. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. The W-7A is available on IRS.gov, or by calling 800-TAX-FORM (800-829-3676).

New Divorce and Family Law Blogs

Bankruptcy and divorce, two subjects existing closer than will please many is the subject of The Interplay Between Bankruptcy and Divorce Law in Virginia. Not exactly a zinger for a blog name but spot on accurate for its content.  The posts concentrate on Viriginia, naturally.  Which does not mean it lacks value for Indiana - just check its bankruptcy reports against our Seventh Circuit.  (I do not expect many differences but what differences exists will probably be significant.)

I found interesting what differences exist between Indiana and Virginia in its Top Ten Costly Divorce Mistakes to Avoid During a Recession (as well as good points for Hoosiers, too):

1. Adultery may eliminate spousal support in Virginia.

Even if our temporary maintenance equals their spousal support, there is no support for this in our statute.  On the other hand, I think our economy and the closeness of income between parties makes maintenance (temporary or otherwise) difficult to get.  For more on Indiana maintenance go my archived articles.

2. Be aware of formulas and guidelines for determining support in Virginia: child support guidelines are the presumptively correct starting point for support; pendente lite spousal support: w/child – 28/58%, w/o child – 30/50%.

This is true for Indiana, too.  Diverting from our Child Support Guidelines means having a very good reason.

3. Alimony: request it, reserve it, or lose it.

Not got alimony in Indiana but maintenance we do have.  Request a provisional hearing and ask for temporary maintenance and save permanent maintenance for the Final Hearing.  But go back and see my comment to 1.

4. You have 2 years to file for an annulment and you may lose your right by cohabitation after knowledge of the facts.

Looks like annulment may be as hard to get in Virginia as in Indiana.  Cohabitation is also a defense in Indiana.  This did point out to me that there is no explicit statute of limitations for annulment in Indiana under the Indiana Code (and certainly none mentioned in any of the available cases).  I suppose that our general statute of limitations on fraud may apply.  For more about annulment in Indiana, follow this link to the annulment articles archive.

5. Do not delay the filing of a motion to modify support upon a material change in circumstances.

Damned good advice.  This applies everywhere.  Even when there is not a recession.  Do not say that you cannot afford a lawyer - find one that will unbundle services or one that takes payments.  Getting behind in your child support means contempt, which can mean jail.  You figure out which is cheaper - a lawyer or jail time.  For my articles on contempt, go here.  For my atricles on attorney fees go here, and for child support articles follow this link.

6. Judges are hostile to the concept of separating under the same roof in Virginia.

Never seen this problem in Indiana.  Especially locally with our post- General Motors economy, judges can have no problem with two people living together who do not want to be married any longer.

7. A suit for a divorce from bed and board can be filed immediately in the Circuit Court. You may be able to obtain pendente lite relief for temporary support, attorney’s fees and costs, protective orders, temporary custody and child support, exclusive use of the marital residence, or a freeze on assets.

Take out the "from bed and board" and add after Circuit Court "or Superior Court", and  take out "protective orders" and , and you have a good description of what Indiana courts can do.  Protective orders need filing separately here.  I have an arichive of my aticles on our courts and an archive on protective orders.  I put in these links so that more specific information is can be gotten to, please use them to get at this information.

8. Consult with your tax advisor concerning the tax consequences of spousal support, allocation of the dependency exemption, exclusion of gain from sale of marital residence, etc.

Another good idea that applies here as well as Indiana.

9. Be careful about leaving the marital residence without a separation agreement.

I do not think this is as a lethal in Indiana as it appears to be for Virginians.   That any agreement is a good thing, I will not deny.

10. Consider the possibility in your agreement that one spouse may file for bankruptcy relief.

Always, always consider the fact of bankruptcy.   Maybe it is all my years when I did practice consumer bankrutpcy law but I am a bit surprised by lawyers who do not think of bankruptcy.

McLean County Divorce comes from Illinois lawyer, Jon D. McLaughlin, with me having a bit of concern over the two months from his last post.  However, Hoosiers still might learn from his Change of Child Custody and Simple Divorces (we have a better procedure here). I have some quibbles with his Suggestions for Fathers going through a divorce but on the whole, it is a good collection of suggestions for Indiana fathers.  Let us hope that Mr. Mclaughlin continues to publish his blog.

Okay, it is Canadian but Collaborative Practice Canada does a more than adequate job of promoting colllaborative law.  I cannot say that anything specifically applies to Indiana but that has is not quite the point either.  If the general public wants a less adversarial approach to family law cases, then the general public needs to know that an alternative not only exists but why it is preferable.  That said, give a look at Collaborative Law - in the interests of families and children..


 Another family law blog, this time from California's Orange County.  Hence the name being Orange County Family Lawyer Blog. It looks fairly new but the articles are clearly written and succinct.  Still fairly new and may interest those who want to contrast Indiana's courts with another state.

Reminder about income taxes and family law

New York Divorce Law Blog had a good post on this subject, IRS TAX EXEMPTION FOR CHILDREN AND DIVORCE AGREEMENTS

In 2008, the IRS amended Code Section 152(e), which addresses child dependency exemptions. The changes affect the procedures and means for claiming the exemption. The new rules should be carefully followed to ensure that the exemption is taken by the parent entitled to it, and that the appropriate language is contained in divorce or separation agreements to reflect the current state of the law.

1. A divorce agreement or court order can no longer be used as a substitute for Form 8332. The parties must actually complete the form.

2. Beginning in 2009, the custodial parent is the one with whom the child resides the greater number of nights during the year, regardless of the terms of the divorce decree.

3. Beginning in 2009, the custodial parent can unilaterally revoke the release of a child exemption for calendar years 2009 and beyond regardless of when the release was made.

In light of these developments, all non-custodial parents who plan to claim the exemption must obtain a signed Form 8332. In addition, divorce or separation agreements should address the potential for a release being improperly revoked after it is given.

Remember the Internal Revenue Service has its forms on its Forms and Publications page.

Along similar lines is this from FOX 4 Finance: Divorce - WDAF

Many parents negotiate the allocation and use of the personal exemptions for the children on the tax returns. Usually, the parent in the higher tax bracket should claim the children to get a bigger benefit for the exemption (unless it gets phased out).

But keep in mind the ramifications of using the personal exemption: under the rules for education tax credits, only the parent who claims the child as an exemption AND pays the tuition can claim the credit. Also, a child tax credit can be lost if the child is claimed as a dependent by a parent who makes too much money (credit is phased out at $75,000).

Remember, if you want more information about retaining me for a case, please give me a call at 765-641-7906.

One for Tax Time

From Family Law Prof Blog - Case Law Update: Tax Time and Divorce.

"One often-litigated issue is the tax treatment of alimony payments. The tax code provides that alimony will be deductible to the payor and taxable to the payee."

Characterization issues are the most commonly litigated issue in this area. For alimony to be deductible it must truly be alimony - as opposed to child support or property division and, for purposes of I.R.C. § 71 and I.R.C. § 215, the support must terminate on ex-wife’s death. So for example, the tax court in Swening v. Comm'r, T.C. Summary Opinion 2009-7 (Jan. 8, 2009) held that an ex-husband's unallocated support payments were not deductible because they lacked these essential terms and the state's divorce statutes did not suppy the missing terms.

A recent tax court opinion notes that, in order to take the deduction, the payor must have actually paid the alimony. In Jonas v. Comm'r, T.C. Memo 2009-49 (March 5, 2009) the ex husband was ordered to pay support to the ex-wife. While he did not make those payments for two years, he did take deductions for alimony paid. The IRS disallowed those deductions and it's decision was upheld by the court. The court held that husband had not made a "payment" by virtue of the fact that husband's property, which had been subject to a lien to secure the alimony, was sold and the proceeds placed in a trust securing the alimony.

Want to Tap Your 401(k)

Read Things to know before tapping your 401(k) for a distribution or loan first. Short, to the point, and I would have to quote the entire post to get everything of value.

Family Law and Tax Time

I know it is almost time to file taxes - another delayed post due to flu episode. Still there may be something of interest in Florida Divorce & Family Law Blog's Claiming The Kids On Your Taxes:

"One of the issues that arises in divorce, no matter what tax bracket you are in, is who is going to get to claim the kids on their taxes. The person paying child support believes that they should be entitled to that deduction and the person who is the primary residential parent for the child also believes they are entitled to that deduction. Who is right? Well, according to Federal Law, the person who is designated as the primary parent, or the person with whom the children primarily reside, is allowed the dependency exemption. However, this is always subject to negotiation, and more often than not, the parties agree to alternate the deduction on an every other year basis."

An innocent spouse case

Innocent spouse involves the Internal Revenue Service, a spouse with tax problems, and another spouse who has no part in whatever caused the other spouse's tax problems. Sounds as clear as mud, right? Remember this is tax law.

The New Jersey Family Law Blog has the following post on the subject:

"The wife was not eligible for the benefits of 'Innocent Spouse' treatment under Internal Revenue Code Section 6015. Thus, the tax penalties, interest and liabilities in question were not solely attributable to the husband. The wife was deemed to have had actual knowledge of the understatements of income. This was because she was college-educated, she had access to the parties' joint bank accounts, she balanced the parties' checkbook, she admitted to her status as a member of the parties' Limited Liability Partnership, and she failed to satisfy her duty to make diligent inquiry. Golden et ux., v Commissioner, TC Memo 2007-299, October 8, 2007"

Tax intercepts caused my most common experiences with innocent spouse issues. That is where the joint tax return was taken by the State of Indiana to pay one spouse's child support arrears.

Get a lawyer if this problem happens to you.

Family Law and Income Tax Deductions

I see two kind of cases involving the dependency deduction: where the custodial parent does not execute the waiver and where a non-custodial parent takes the deduction without any right to the deduction. I read the post, DEPENDENCY DEDUCTION GOES DOWN IN FLAMES: Tax Court Rules Noncustodial Parent Is Not Entitled to Dependency Deduction Because a Valid Form 8332 (or Equivalent) Wasn't Attached, from Family Law Taxation as dealing with the second type of case.

"In order for a taxpayer to be entitled to the dependency deduction, the taxpayer must satisfy rather explicit statutory requirements. In the case of a divorce or separation, this can be particularly difficult for the individual that does not have custody (referred to as the 'noncustodial parent') -- even if the individual was 'granted' the deduction as part of the divorce proceedings.

Dependency deduction for noncustodial parents: The noncustodial parent is not entitled to the dependency deduction unless the individual attaches a valid written declaration (IRS Form 8332 or its equivalent) to their Federal tax return for the year the deduction is claimed. In the event a written declaration relinquishes more than one year, then the original must be attached to the first claimed year and a copy attached to each subsequently claimed year. For a discussion of these rules -- see FAQ: Dependency Deduction.

In Chamberlain v. Commissioner, the U.S. Tax Court ruled that the former husband (taxpayer) was not entitled to the dependent deduction for one of his children because he didn't attach a valid IRS Form 8332 (Release of Claim to Exemption for Child of Divorced or Separated Parents) to his 2003 Federal tax return (the child credit was also denied because it is premised on being entitled to the dependent deduction for the child). The Tax Court concluded that the attachment of a Post-It note referencing the initial (1995) Form 8332 didn't satisfy the statutory requirement of attaching a valid written declaration.

For those filers who have a validly executed waiver, you must attach the waiver.

As for the Indiana cases where the custodial parent refuses to sign the waiver as ordered by the court, the non-custodial parent can file a contempt affidavit. I suggest contacting me or another lawyer to do this. Remember that if you win, then you get attorney fees.