Gastelum Attorneys Warns of Divorce Tax Errors for Tax Season

Navigating Tax Season After Divorce: Essential Insights from Gastelum Attorneys

As tax season unfolds, many divorcing and separated couples in Clark County may face unexpected challenges if they're not well-informed about the tax implications of their changes in marital status. Gastelum Attorneys, a prominent family law firm in Las Vegas, is issuing an alert regarding common tax errors that can lead to significant financial penalties and complications for families. With their experience handling over 5,000 family law cases, the attorneys highlight that certain tax issues arise frequently during this stressful time.

One of the pivotal aspects of this advisory pertains to the tax filing status of divorced individuals. When it comes to tax returns, the IRS operates with different regulations than those outlined in divorce decrees. Many clients express surprise at how their divorce agreements do not align seamlessly with IRS rules, particularly concerning tax exemptions and deductions. According to Jennifer Gastelum, the Managing Attorney, “Your divorce decree and the IRS operate by different rules. Many clients are shocked to learn that what their divorce agreement says about tax exemptions means nothing to the IRS without the right form attached to the right return.” Thus, focusing on pre-filing corrections is crucial instead of making amendments post-filing.

Common Tax Errors to Avoid

Gastelum Attorneys have pinpointed seven critical areas where filers often err:

1. Filing Status: Many believe the filing status is determined by when divorce proceedings started; in reality, it is based on one’s status as of December 31 of the tax year. If the divorce is not finalized by year-end, one remains legally married for tax purposes.

2. Dependency Claims: A frequent contention arises when both parents attempt to claim their child as a dependent. By default, the custodial parent—the one with whom the child resided for the majority of the year—is entitled to the dependency exemption and Child Tax Credit. To transfer this right to the non-custodial parent legally, Form 8332 must be appended to their tax return.

3. Alimony Deductions: Post-2018, the tax deduction for alimony payments has been abolished for divorces finalized after December 31, 2018, meaning there are no tax implications for either party regarding spousal support.

4. Child Support Tax Neutrality: Child support payments are neither deductible for the payer nor considered taxable income for the recipient, eliminating potential tax-related stress.

5. Property Transfers: Assets that change hands during a divorce retain their original cost basis, which may lead to capital gains exposure later on during asset sale.

6. Retirement Funds: Distribution from 401(k) plans and pension plans necessitates a Qualified Domestic Relations Order (QDRO); failure to execute this correctly can incur a tax penalty along with early withdrawal fees.

7. Joint Filings: Filing taxes jointly while undergoing a divorce can create shared liability. If one spouse has unreported income or concealed assets, it can result in complications for both parties.

Capitalizing on Filing Status Advantages

An often-overlooked filing status, the Head of Household, can offer lower rates and higher standard deductions for qualifying single parents. To qualify, one must contribute over half of household expenses and have a qualifying child living with them for the majority of the year. This status can greatly alleviate tax burdens, yet only one parent may claim this benefit each year.

Gastelum Attorneys urge Nevada residents who are dealing with the complexities of divorce or custody matters during tax season to obtain professional assistance. The firm offers personal consultations either via phone or at their Las Vegas office.

About Gastelum Attorneys

Gastelum Attorneys began operations in 2018, with a commitment to serving the unique needs of a diverse clientele. Managed by Jennifer Gastelum, a graduate of UNLV with a J.D. from the Boyd School of Law, the firm specializes in family law, addressing divorce, child custody, support, and division of property issues. They are dedicated to providing services in both English and Spanish in the Las Vegas area.

For more information, visit gastelumattorneys.com or contact them at (702) 979-1455.

Conclusion

As tax season approaches, understanding the implications of divorce and custody changes can save individuals from unexpected expenses. Ensuring proper filing practices is essential in navigating the complexities of tax obligations post-divorce. Families seeking guidance can turn to the experienced team at Gastelum Attorneys to help simplify the process and reduce the stress associated with tax season.