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Surviving the taxes after a Colorado divorce

Many Colorado residents have surely read or heard about the latest trend regarding divorce. This trend is called "conscious uncoupling" and was made popular by the amicable split of entertaining parents, actress Gwyneth Paltrow and singer Chris Martin. They have taken the position of having an amicable divorce and giving each other respect. Compared to what was once considered a battle to the death with the soon-to-be ex-spouse with the winner taking all has now become more civilized and less contentious. What is not mentioned are the financial battles that many still have.

The real question lies with how the Internal Revenue Service views this peaceful separation. The IRS may only care about whether a judge has signed the proper legal forms. What many people do not know about how to handle taxes after a divorce could quickly become more costly than the divorce. For instance, the spouse that is awarded assets, whether it is the family home or a financial holding, will still have to pay the taxes on them without the other to help as they once did as a couple.

The next major obstacle may be which parent can claim the child on the taxes. According to the IRS, even a properly signed divorce decree may not be enough to prove dependency from the other spouse. The IRS now requires the filing of Form 8332 by the custodial parent, which gives the non-custodial parent the right to claim the child as a dependent for tax reasons. Alimony also provides tax implications since it is taxable as income for the receiving spouse. This could move the receiving spouse into another tax bracket.

Colorado residents who think that their troubles may be over when a judge signs off on their divorce papers might need to think again. The first year after a divorce can be trying for everyone involved. Making sure that everything is discussed upfront can help eliminate further and potential costly surprises that no one needs as they start their new life as independent people after a marriage.

Source: Reuters, "What's even worse than a divorce? For some, it's the taxes", Lauren Young, April 10, 2014

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Brandon Ceglian

Brandon Ceglian's practice focus is family law, landlord-tenant law / real estate, civil litigation, criminal / DUI, and collections. View Attorney Profile

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