Financial Mindfulness and Empowerment in Marriage (Inventory Your Tax Returns)

Federal and State Tax Returns are your most important financial records 

• Direct access to your federal and state tax returns is essential (and should be your top priority);
• Do you Maintain physical and digital copies?  If not, you should!

Best Practices for Couples

• Each marital spouse should maintain direct access to the family tax returns (going back 5-years);
• Review the tax returns each year;
• Understand all income sources (including businesses (key forms & schedules);
• Review the family’s total tax obligation and payment schedule;

Federal and state tax returns document the household’s gross income, adjusted gross income, and net income (for you and your spouse) and document that your federal, state tax obligations have been met.  These documents also serve as the documentary basis for applying for loans (e.g. mortgages), bank relationships, and other types of personal guarantees and borrowing (business and personal).

Divorce Related Tip

Why is this important in a divorce action? — Tax returns are the most important document in drafting arguments for Financial Orders, calculating Alimony.  Accordingly, having access to tax returns makes the discovery process both easier and faster.

ADVANCED CHECKLIST

 [The advanced check list illustrates the level of detail that begins to be explored when prepping in a divorce proceeding]

Access your Returns

Where are your tax returns?

Who prepares your tax returns?

If an accountant prepares your tax returns, do you know who the accountant is?

Do you know how to contact the accountant?

Have you introduced yourself to the accountant?

Review your Returns

Do you review your tax returns each year before they are filed or do you simply sign?

Have you reviewed the 1040 form of your tax return?

W-2 vs 1099 Income (Wage vs. Self-Employment)

Do you know your spouse’s wages and salary?

Do you know where on the tax return to find this information?

Have you reviewed your spouse’s W-2 form?

Do you or your husband receive 1099 forms?

Have you reviewed this form?

Do you file a Schedule C?

Other Income

How much interest and dividend income you and your spouse receive each year? Do you know from what accounts you receive dividend and interest income from?

Is your interest income tax exempt income?

Is the dividend income qualified (eligible to be taxed at capital gains rate) or non-qualified (taxed at your regular income tax rate)?

Do you know where on the tax return you can find this information?

Do you know what capital gain and capital loss income is?

Do you know what items can be deducted on your tax returns?

Business Income

Do you or your spouse have your own businesses?

Do you or your husband complete a Schedule C?

Do you or your husband receive K-1 form?

Do you know where on the tax return you can find K-1 or Schedule C information?

Do you know why you receive and complete these forms?

Have you reviewed these forms?

If so, what are the gross revenues?

What are the expenses of the business?

What is the profit of the business?

The Big Picture

What is your adjusted gross income?

How much do you pay in federal taxes each year?

How do you pay in state taxes each year?

Know your Withholdings and Timing of Estimated Tax Payments:

Do you know if payments for federal and state taxes are deducted from each paycheck received or are quarterly payments made or are no taxes paid?

If there is a Refund, Know Where the refund Gets Paid 

If there is an overpayment of taxes, is the overpayment refunded or is applied to the following years taxes? If an over payment is refunded, where is the refund mailed or directly deposited into what account?