Heading into a divorce, it‚??s likely that there are many topics on your mind. Consulting with your tax accountant and your Norfolk divorce attorney may help you understand strategies and options to minimize the tax consequences of your divorce. Many people are not aware of the tax implications of various divorce decisions.
For example, if spousal support is awarded in your case, the payments are typically deductible by the person making the payments and taxable for the person receiving them. Child support payments, however, are usually not deductible or taxable.
One of the most important pieces of the division of property has to do with retirement plan benefits. The most common method of handling these tax-deferred benefits is known as a qualified domestic relations order. This establishes an alternate payee‚??s right to receive some or all of the plan benefits. This order does not necessarily require that an IRA be divided, and it‚??s important to understand that there can be serious tax consequences associated with division of an IRA.
This highlights the importance of hiring a Norfolk divorce attorney and a tax accountant to help you understand tax implications. If IRS-approved methods for the IRA transfer are used, for example, penalties and taxes can be avoided. If the transfer takes place before the divorce or separation is final, though, and special care is not taken to minimize tax consequences, the IRA owner may be responsible for taxes on the distribution even if some of those funds are being paid to the other spouse.
Tax issues can be complex and confusing, which is why you should always work with an experienced Norfolk divorce attorney in conjunction with your accountant to understand and prepare for possible tax consequences of your final divorce arrangements. Contact Linda Shin of the Cedar Law Center today at 757-490-7802 to learn more about the tax implications and consequences of your Virginia divorce.