One of the favorite sayings of my first managing partner, the late Herb Cohan, was “I’d rather owe it to you than cheat you out of it.” To be honest, like some of the other sayings, I was never clear exactly what it meant. Nonetheless, I think it sums up pretty well a tax strategy that is becoming more viable every year. File a timely accurate return and just don’t pay. Wait 10years and celebrate when the statute of limitation on collections runs out.
Did you know that not paying can be a strategy to get out of your tax bill? It can be, depending on the qualifications and your specific circumstances. Keep reading to see how to qualify.
Divorce and Taxes
Timalyn Bowens, EA
“Timalyn, Alyssa and I filed for divorce, and we will finalize everything before Thanksgiving. Does this change things for our taxes?”
“No! Can we wait until January 1?” were my initial thoughts. But then I realized that if this news blindsided me, the seemingly happy couple was probably also scrambling for answers. They were looking to me to be calm during an upcoming storm.
To give you some context, I had helped this family lower their back taxes by $16,000 and get a payment plan that worked well with their cash flow. Then, by implementing a few strategies they had just saved an extra $20,000 on their last tax return. We were planning on saving them even more money in upcoming years.
Then, that is when it happened. Divorce.
I never saw this happening, so I never prepared for it. But if it happened to me, it will happen to you. Clients divorce.
Some of the things we are going over today may seem obvious to you. But remember what is obvious to us as tax experts is not obvious to our clients, especially if they are going through a life-changing event such as divorce.
Here are four things you need to inform your client about when it comes to their divorce and taxes…
