What is more important to you: saving money in the short term or circumventing a potential financial mess in the future? A recent Reuters article authored by the Managing Editor of Wealth Manager and OnWallStreet magazines Nancy R. Mandell asks those considering divorce this very question in timely context.
The deadline to file 2010 taxes is this coming Monday, April 18th. Many men and women in Florida may still have yet to complete their returns. If any of these Floridians also happen to be considering a divorce in the coming year, Mandell’s article states that it may be in their best interest to file their federal tax returns separately from a potential ex-spouse.
Why file separately?
Of course, there are downsides to foregoing filing jointly with your spouse. There are certain tax benefits in place that make joint filings financially attractive options, to the point that most couples are unaware the option to file their federal returns separately even exists. Also, separate filings will definitely cost a couple more in the short term, but is that really what is most important?
Martell maintains that the risk of tax liability incurred if an ex-spouse underreports income or overstates deductions is too great if a person is already considering divorce when filing a federal tax return. She urges her readers to incur the cost of filing separately now in order to save hassle and greater expense to get the situation straightened out later. It’s worth mentioning that the “innocent spouse” defense could be made on a person’s behalf by a skilled attorney, though taking such action also can be quite costly and should be reserved for extreme scenarios.
Overall, the main point Martell is attempting to make is that those considering divorce should consider being honest with themselves in assessing the health of the marriage before filing federal tax returns.
Source: Reuters “Considering divorce? File your taxes like you’re already single” by Nancy R. Mandell, 4/14/11