Many couples go through divorce sit down with their lawyer they plan on how to dissolve their marriage. They talk about who is going to keep the house, the car, the pets, the money, and even who is going to have custody of the children. However, nobody plans for taxes. How are they going to handle this year’s tax with the divorce and what happens in subsequent years? What does it mean when one parent gives dependency exemption to the other parent but still lives with the child? What about day care, medical, and college expenses. Couples going through divorces need to know how these decisions in filing your return affect the each individual’s returns, refunds, and liabilities.
An awful amount of time is dedicated by me helping divorced couples through these types of dilemmas. However, the parents usually come to me when they have already filed their returns. Both parents file the same status, usually head of household. TWO YEARS LATER, They get a letter from the IRS looking for burden of Proof of whom is entitled to this refund.
Even in a foreseen amicable divorce, the relationship might turn into a war between the parents and the children are caught in the middle of this turmoil.
In the end, one parents wins and the other will have to pay thousands of dollars in penalties and interest. Usually, the parent who was disallowed the credit feels that he/she did not do anything wrong. Then the parent usually blames the tax preparers, who may or may not be around anymore.
It seems many tax preparers with no experience on tax law are trying to make a quick buck. They set up shop for 3 months, buy tax software, and post signs claiming they will give anybody $3,000 for every child. Remember seeing these signs on the road?
As a tax instructor, accountant, and Enrolled Agent this seems like a joke to me.
How can a tax preparer assure a refund amount before having a detailed interview with the clients and reviewing his /her paperwork.
Another scenario may be where, a tax preparers poor service by not having the thorough interview with the client, not explaining the difference in filling status, and advising the client of the consequences when claiming certain credits on the parent’s return and how his/her position will affect the other parent.
In the end, the lesson is always the same, Do yourself a favor and go to a professional. Be sure the work with a tax preparer that will give a thorough explanation of what you are claiming and make you aware of all the consequences. Work with a tax professional that you can call if any IRS notice arises and handle any and all issues on your behalf.