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Property division, tax audits and divorce

Couples that have gone through a divorce may have no desire to maintain contact with their former spouse. Of course, if children are involved, minimal communication may be unavoidable. For those without children, however, many find it easiest to simply move on and start their new life with a clean break.

However, readers may not have realized that financial disclosures made in divorce court have the potential to wind up in an audit by the Internal Revenue Service. Under federal law, the IRS has 3 years after a divorce to audit the marital estate’s assets and finances. 

If IRS auditors find a discrepancy larger than 25 percent, that limitations period can be extended to 6 years. Furthermore, if IRS officials suspect the discrepancy was the result of fraud, the limitations period might be tolled until the conclusion of their investigation.

The prospect of having to reopen communications with an estranged former spouse may not sound desirable to many readers. To avoid this outcome, an individual considering a divorce might benefit from choosing a divorce attorney wisely.

An experienced attorney will have strategies to suggest for valuing the marital estate. An attorney might also have advice for discovering hidden assets and obtaining information from a spouse suspected of withholding financial information. Sometimes, an omission may be unintentional, as in the case of pensions, IRA and 401(k) division. However, if those asserts were acquired during the marriage, they are generally considered marital property and must be divided -- and reported to the IRS.

Source: Forbes, "Divorce Causes Tax Audits," Cameron Keng, Feb. 10, 2014

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Property division, tax audits and divorce | Peter A D'Angelo, Attorney at Law, PLC