Bedrock Divorce Advisors
Archive for the ‘Divorce Financial Analyst’ Category
Tax Dilemma for Divorcees – Who Gets to Claim Head of Household?
There are many issues that must be resolved during divorce that will impact how you file your taxes each year. In addition to several potential tax credits, it is important to understand who will be eligible to file as “Head of Household.” This is very important because filing as Head of Household will typically result in a lower tax bill than filing as Single or, if you are not yet divorced, Married Filing Separately.
Generally, the Head of Household filing status is determined by your custody arrangement. The parent who has the children more than one-half of the year can claim the Head of Household filing status. The only way that both parents can claim Head of Household is if they have more than one child and each parent has at least one different child living with them for more than one-half of the year.
People sometimes mistakenly believe that claiming a child as a dependent entitles them to file as Head of Household. This is not necessarily true. To qualify as Head of Household you must meet the following requirements:
• You must maintain a household for your child (even if you do not claim them as a dependent)
• You must be unmarried at the end of the year or living apart from your spouse for more than six months
• The household must be your home and generally must also be the main home of the qualifying dependent (i.e. they live there more than half the year)
• You must provide more than half the cost of maintaining the household
• You must be a U.S. citizen or resident alien for the entire tax year
You do not need to claim a dependent to file as Head of Household. This means that even if you allow your ex-spouse to claim your child as a dependent, you can still file as Head of Household.
If you can claim Head of Household you may also qualify for the Dependent Care Credit, the Earned Income Tax Credit (this is for lower income people), as well as other rebates that may be available for that tax year.
In some cases, if you are separated, but not divorced, and are filing separate tax returns, you may be able to file as Head of Household. You will need to meet the criteria mentioned above to do this.
Deciding the filing status and who will claim dependents can have a tremendous impact on your tax situation. You may be able to save thousands of dollars in taxes. So, it is important to work with a divorce financial specialist (such as one of our Divorce Financial Strategists™) both during the divorce process and after. You need to fully understand the impact that your filing status and tax credits may have on your bottom line before you agree to a divorce settlement.
All content on this site/blog is for informational purposes only, and does not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.
January is the Busiest Month According to Divorce Professionals – Are You Ready?
January is the busiest month for divorce professionals. I have not seen official statistics proving this, but I can tell you that we, along with our divorce professional colleagues, all notice increased activity in January.
Many say this is due to families trying to “stick it out” through the holidays for the sake of their children, and others say that people make this decision as one of their New Year’s resolutions. No matter what the reason, if you find yourself at the beginning of the divorce process you should organize as much as possible to make the process go more smoothly.
Below you will find a partial list showing you what financial information you should begin gathering:
1. Income Tax Returns. Completed personal, corporate, partnership, joint venture, or other income tax returns (federal, state and local), including W-2, 1099, and K-1 forms, in your possession or control for the last 5 years, including all amended tax returns. Do you expect any tax refunds?
1A. Business Financial Statements.
– Net worth statement – balance sheet or list of assets and liabilities
– Income statement – cash flow or income and expense statement
2. Income Information. Current income information, including payroll stubs and all other evidence of income (investment property, rental/lease agreements, dividends, interest, royalties, lottery winnings, etc.) since the filing of your last tax return.
3. Personal Property Tax Returns filed in this state or anywhere else from the start of the marriage.
4. Banking Information. All monthly bank statements, passbooks, check registers, deposit slips, canceled checks, and bank charge notices on personal and business accounts, certificates of deposit, and money market and retirement accounts from banks, savings and loan institutions, credit unions, or other institutions in which you or your spouse has an interest.
5. Financial Statements submitted to banks, lending institutions, or any other persons or entities, which were prepared by you or your spouse at any time during the last five (5) years.
(To download the full list of 29 items, please go to our Bedrock Divorce Facebook Fan Page here.)
We would greatly appreciate it if you could “Like” our fan page while you are there.
If you are a woman contemplating divorce and you don’t have easy access to all of this information, do not worry! Oftentimes we can help you find easy ways to obtain the information you need. Just begin gathering as many items as you can, and then make an appointment with a Divorce Financial Strategist™ or divorce financial analyst. They will help you (and your divorce attorney) make sense of your current financial situation along with the future financial and tax implications of your various divorce settlement options. The sooner you start gathering this information, the less likely you will still be dealing with your divorce next January!
Important Reasons That Career Women Should Consider Using a Divorce Financial Strategist™ or Divorce Financial Analyst
If you are a busy career woman who is in the midst of an emotionally-charged divorce you might be dealing with several issues that you had never expected to face. This is especially difficult for those of you who once had a clear and firm plan for your financial future. You took the time to work with your spouse to ensure that the both of you and your children would be financially secure.
Now everything’s changed.
No matter whether the divorce was your idea or something thrust upon you, you now are wondering what tomorrow will look like – much less the rest of your financial life. You might be tempted to accept the first settlement proposal suggested by your divorce attorney or by your spouse’s attorney just to get things over with. As tempting as this may be, you should take your time with making these critical decisions because, for the most part, they cannot be undone.
Getting through the financial issues is often the toughest part of a divorce. But it doesn’t have to be this way. Meeting with a Divorce Financial Strategist™ (a Certified Divorce Financial Analyst [CDFA™] with advanced training in divorce financial planning strategies and asset protection) can ensure your financial protection now and in the future by helping you fully understand the financial and tax implications of your proposed divorce settlement.
Here are some of the ways a Divorce Financial Strategist™ or Certified Divorce Financial Analyst can help you:
- Planning – A divorce financial analyst can help by developing a short-term and long-term financial plan so that you can make sure that the decisions you make today won’t negatively impact your financial future.
- Researching – A divorce financial analyst traces and illustrates assets, debts, income and expenses as well as assesses tax consequences and prepares reports showing alternative settlement options.
- Strategizing – By developing and analyzing multiple financial scenarios, a divorce financial analyst can help you understand the immediate and long-term implications of each proposal.
- Reviewing – A divorce financial analyst can review settlement proposals, prepare schedules to compare alternative outcomes, and provide an objective second opinion to help you make more informed decision.
If you would like to see how one of our Divorce Financial Strategists™ can help you clarify the financial details of your divorce and get you a better settlement, please call us at (917) 602-6977 or email us at info@bedrockdivorce.com to schedule a free, no-obligation, half-hour consultation.
Why Women Business Owners Should Consider Divorce-Proofing
Picture this scenario…
Mary and John have been married for many years. Mary stayed home and raised three children and helped John build his career. Mary went back to school without any financial help from John and then became a lawyer and built a successful law practice. John fell hard for his secretary and filed for divorce. John sued for half of the value of her law practice – and got it.
Oddly enough, the system of equitable distribution came about largely to protect women. Several years ago many states adopted this model to protect the dependent homemaker who raised children and helped her husband build his career only to find herself with little or nothing when the marriage ended. The idea was to make sure that the woman had an equitable share of the family’s assets even though her contribution was not financial.
The very rules meant to protect women are now working against them. This is why all women business owners should consider divorce-proofing their business or professional practice, even if they don’t anticipate a divorce.
Here at Bedrock Divorce Advisors, we have developed an easy two-step process. First, one of our Divorce Financial Strategists™ (a Certified Divorce Financial Analyst [CDFA™] with advanced training in asset protection and divorce financial planning strategies) will analyze potential risks you and your business might face in the event of a future divorce. Second, the Divorce Financial Strategist™ will recommend immediate steps you should take to guard against those risks. This two-step process will put you in the strongest possible financial position to deal with and recover from any possible future divorce.
While some may wonder why they need divorce-proofing if they are still single or happily married, we know from experience that divorce-proofing should be part of every woman business owner’s normal financial planning and risk management, regardless of her current marital status.
To find out how divorce-proofing can help you and your company, please call (917) 602-6977 or email us at info@bedrockdivorce.com to schedule a free, no-obligation 20 minute phone consultation.
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