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As mentioned in the most recent post, we have reached the end of the series on steps to take when you are facing a divorce. Although there are other things to say on the subject, if you consider these steps and discuss them with your lawyer, it should ease the difficulty of the process.

I set out here the list of steps to consider in its entirety for easy reference:

1. Find a wise guide

2. Make an accounting of the family finances

2A. Determine what you own
2B. Determine what you owe
2C. Determine income (yours and your spouse’s)

3. Make photocopies of the financial records

4. Prepare a budget

5. Document and safeguard personal property

6. Establish your own credit

7. Assess the financial accounts

8. Address the credit accounts

9. Avoid additional debt or major purchases

10. Stay put

11. Keep a diary

12. Consider a private investigator

13. Be good

This recent article from The Oklahoman revisits some of the tax issues arising from divorce cases. According to the article and to my surprise, there are many divorcing spouses that do not realize that periodic alimony is included as income for tax purposes (don’t there lawyers explain this to them?). So, because taxes are not withheld, they are surprised in April to find out they owe taxes on all of the alimony received in a given year. The percentage will obviously depend on the recipient’s tax bracket.

My suggestion is to take 25% – 30% of each alimony check received and put it in a separate “tax account” to be used only at tax time to pay this obligation. I also recommend considering an ING Direct online account for this purpose. This account is currently paying 4% APR, which is better than most bank checking or savings accounts, and the money is liquid. Additionally, you link the ING account with your normal checking account and it is easy to make transactions into and out of the account online.

Also remember that if you want more in depth information, go to www.irs.gov and download publication 504, the tax guide for Divorced and Separated Individuals. Or you can access a pdf version here.

If you have any questions about the implications your divorce case will have on your tax situation, discuss it with your CPA or tax planner. The time to have that conversation is before the divorce is finalized.

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Jim Jeffries | Mobile & Baldwin County Attorney

Jim currently is a member of the Alabama Supreme Court's Advisory Committee on Child Support Guidelines and Enforcement as well as a statewide committee that has been tasked with reviewing and making recommendations for possible revisions to Alabama's version of the Uniform Interstate Family Support Act (UIFSA). Jim was also recently appointed by the President of the Alabama State Bar Association to a serve on a committee whose purpose is to review and comment on Alabama legislation regarding joint custody for a proposal to the Alabama Legislature for possible changes in this legislation.

Jim has attained a Peer Review Ranking of AV from Martindale-Hubbell® - The highest an attorney can be ranked by his peers.

He continues to lecture to attorneys across the state regarding family law issues.

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Jeffries Family Law, LLC

Divorce Attorney | Child Support & Child Custody Attorney | Prenuptial Law Attorney

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