A Colorado divorce case can have many facets to it, whether financial or child related. The financial aspects of a divorce case can include property division, alimony (properly termed "maintenance"), and child support. With those financial aspects come various nuances and intricacies of which your expercienced Colorado family law attorney should be aware. One category of nuances tied into the financial aspects of a divorce case relates to taxes.
Most Denver area divorce attorneys have a basic understanding or knowledge of tax implications tied into a divorce case. Because the Internal Revenue Code is a volumious and shifting literary compilation, most family law attorneys are hesitant to give concrete tax "advice" to their clients. That does not mean that we cannot import general tax information or knowledge to our clients with the caveat of, "you should follow up with an accountant to be certain." In essence, family law attorneys are not tax experts. Despite the lack of expertise as relates to taxes, set forth below are some of the basic topics in which tax issues can arise in a Colorado divorce case and basic information related to such.
"Maintenance" is the proper term for what people might often call alimony in Colorado. Alimony is essentially spousal support. Colorado statute and case law indicate that depending upon financial circumstances, one spouse may have a duty to financially support the other, for a certain period of time, during and after a divorce case. The issue of taxes arises in an alimoy situation in that the Internal Revenue Code allows the party paying alimony to deduct the payments he or she makes from his or her income on the tax return. This can include temporary maintenance paid while a divorce case is pending, maintenance paid after the divorce is done, or sometimes "unallocated" support that is not necessarily defined, so long as that "unallocated" support is not classified as child support. When one is in an alimony paying situation, it becomes important to speak with a learned accountant to find out specifically your rights, obligations, and what documentation you may need, from an IRS stand point, to be able to claim the deduction. An accountant can also strategize with you in terms of making sure you handle your tax affairs in proper fashion as relates to alimony. The tax code is tricky and subtle deviations in how you pay or what you pay can have an effect. For example, the IRS may allow you to deduct the $2000 in alimony you pay on a monthly or "periodic" basis, but might disallow the deduction if you pre-pay for the year in a lump sum. The primary point is that as an alimony payor, you need to be informed as to the tax benefits and consequences tied into your court orders.