# financial questions before i see the lawyer again



## 845dad (May 28, 2014)

Hi all, for a quick summary of my nightmare look up 845dad on here...now to the point

1. taxes ..she closed out a 401k on the sly...how is this dealt with taxes wise..the judge looked on this kind of disfavoarably and she now has to pay all her own legal fees. but what does this mean to me tax wise..she filed for divorce this year, does that mean we can file separately?

2. The judge also looked up her sudden interest in working after discovery of her infidelity as unfavorable and more so on the fact she stopped paying anything into the family finances. As such she has to pay 25% of the bills back to the time of her setting things in motion...what would family finances entail. obviously mortgage, insurance, car insurance food, cable, lunch money and heating and electricity costs. But would gas for my vehicle be inclided as well and what about meals at restaurants? any other things that i should include...just thought of medical and dental..that aint cheap

thanks for any ideas and advice...been very difficult dealing with someone whos only answer has been ...its up to the lawyers to figure out...at least her lawyer sucks


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## honcho (Oct 5, 2013)

845dad said:


> Hi all, for a quick summary of my nightmare look up 845dad on here...now to the point
> 
> 1. taxes ..she closed out a 401k on the sly...how is this dealt with taxes wise..the judge looked on this kind of disfavoarably and she now has to pay all her own legal fees. but what does this mean to me tax wise..she filed for divorce this year, does that mean we can file separately?
> 
> ...


Taxwise you should file married filing separately. She will need to claim the 401k as income on her taxes and pay the penalties. Was the 401k in both your names or just hers? A 1099 will get generated because of her cashing out the plan.

IF its in both of your names the IRS will be looking for the income that way. If it was only in her name then only her s.s. number should trigger in the system. You should most likely discuss your taxes with a tax professional, an enrolled agent, to cover your bases. Don't rely on your lawyers advice as most are bad on the tax implications of things. 

The IRS could care less what a local judge orders so how the 401k was listed for names will have an impact on how to file. Depending on the dollar amount of the plan you could file under distressed spouse or innocent spouse relief, not exactly sure what its called anymore.


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## EleGirl (Dec 3, 2011)

845dad said:


> Hi all, for a quick summary of my nightmare look up 845dad on here...now to the point


I have a different point of view on this than Honcho does.



845dad said:


> 1. taxes ..she closed out a 401k on the sly...how is this dealt with taxes wise..the judge looked on this kind of disfavoarably and she now has to pay all her own legal fees. but what does this mean to me tax wise..she filed for divorce this year, does that mean we can file separately?


When she closed out the 401K, they have to withhold taxes and most likely a 10% penalty. As your attorney to request a copy of the paperwork from when she closed it out.
All, or some portion of that money is 50% yours. So it needs to be figured into your settlement one way or the other. So add it to her side of the settlement. You get an equal amount on your side from other assets.

You file as married until the divorce is final. 

It’s usually a very bad idea to file married but separate as there is usually a HUGE penalty in that the tax rates are even higher than if you file just plain single. There are also deductions that you can take if you file married joint or single that you cannot take if you file married but separate.

When I do taxes for people who have filed for divorce, but the divorce is not final, I run it both ways. Married joint and married separate. In every one I’ve ever done the taxes are much higher filing married separate. So it’s in both of your interests to cooperate and file jointly.

If you get a tax return, you can specify that the return is split 50/50 (or however) and that your share is direct deposited into your bank account and hers is deposited into her bank account. So neither of you can rip the other off with the refund.

You can ask your lawyer to get an agreement from her attorney that she will cooperate with filing jointly each year until the divorce if final.



845dad said:


> 2. The judge also looked up her sudden interest in working after discovery of her infidelity as unfavorable


Why would a judge look unfavorably on someone working for a living?



845dad said:


> and more so on the fact she stopped paying anything into the family finances. As such she has to pay 25% of the bills back to the time of her setting things in motion...what would family finances entail. obviously mortgage, insurance, car insurance food, cable, lunch money and heating and electricity costs. But would gas for my vehicle be inclided as well and what about meals at restaurants? any other things that i should include...just thought of medical and dental..that aint cheap


Include everything. Download every transaction from your bank account, charge cards, etc. The only things to exclude are if you bought yourself clothing, went to the movie, or bought gifts for anyone except your children.

Let her then prove it if she thinks something is not a family finance.



845dad said:


> thanks for any ideas and advice...been very difficult dealing with someone whos only answer has been ...its up to the lawyers to figure out...at least her lawyer sucks


She wants to let the attorneys figure it out? Wait till she starts getting the bill for her attorney to go through months of family bills and to prove what is/is not a family bill. She'll wake up.


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## honcho (Oct 5, 2013)

It depends a great deal on how much the 401k was also and what her income level really is. a 5k retirement is much different than a 50k cashout. 

If you can file jointly it is often the best choice but if you don't itemize or have children your not losing any credit or deductions by filing separate. If he is paying alimony under a temp order all those things need to be considered. That's why speaking to a tax professional is the best course of action.


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## WorkingOnMe (Mar 17, 2012)

All of this depends on if you live in a community property state and whether she made the withdrawal before or after you were separated under a decree. Talk to a CPA in your state. Your lawyer won't know the tax stuff. I'm a CPA and have talked with hundreds of divorce lawyers. They don't know tax.


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## WorkingOnMe (Mar 17, 2012)

401k accounts are never joint. Its not possible. That kind of arrangement would be an illegal assignment of income. Of course, if you live in a community property state the withdrawal will normally be community income taxable to both if you're still considered married, whether you file joint or not.


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## EleGirl (Dec 3, 2011)

honcho said:


> It depends a great deal on how much the 401k was also and what her income level really is. a 5k retirement is much different than a 50k cashout.


Of course it's a big difference between a 5K and a 50K cashout. But remember that taxes and penalty are already withheld by law. So that's already been paid unless together they are in a very high tax bracket.



honcho said:


> If you can file jointly it is often the best choice but if you don't itemize or have children your not losing any credit or deductions by filing separate. If he is paying alimony under a temp order all those things need to be considered. That's why speaking to a tax professional is the best course of action.


This is why I suggested, and why I always, run the taxes both ways.

Another thing to consider with filing separately is whether or not the state that a person lives in is a community property state or an equitable distribution state.

IN a community property state, when filing married but separate, each person has to claim 50% of the joint income. It gets tricky when one spouse will not share the data from their income. There are ways to handle this. But it’s supposed to be split 50/50. And then taxes are paid by each spouse on their 50% taking into consideration taxes already collected from either party.
845dad lives in NY, or so it says under his name. So he’s in an equitable distribution state. He still should check with a tax accountant to make sure it’s handled correctly for his state.


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## honcho (Oct 5, 2013)

WorkingOnMe said:


> All of this depends on if you live in a community property state and whether she made the withdrawal before or after you were separated under a decree. Talk to a CPA in your state. Your lawyer won't know the tax stuff. I'm a CPA and have talked with hundreds of divorce lawyers. They don't know tax.


Lawyers are idiots when it comes to taxes in general. When I used to work for an enrolled agent years ago he used to offer classes to lawyers in the area for free because they financial divisions during divorce would make such tax messes out of relatively easy things.


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## SunnyT (Jun 22, 2011)

The first year my ex left, the IRS suggested that I file as head of household. Bigger return...of course he owed past taxes so returns were moot. But I did file head of household for the four years we were separated. 

Family expenses also includes insurance, any medical/dental/vision procedures, glasses/contacts, kids braces, groceries, utilities, vehicle maintenance, school activities/fees/trips/supplies, child care, family entertainment, replacing or repairing household items, home repair and maintenance, etc....


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## 845dad (May 28, 2014)

here are some numbers to help with some you the ideas here

my income 150k
hers last year 18k ..but as a BSRN she is easily capable of making 100k in the hudson valley. this year i figure she will make 45k

the IRA she closed out was vallued at 20k 2k penalty 2k taxes taken out. 
What the judge didn't like was her and her lawyer pleading poverty claiming 20k a year when she had started to work any available hour.

and thanks guys for the input...just very frustrated right now. the whole its up to the lawyers to figure out is either a copout, signs of an idiot or signs of a mental condition...just tired of living with someone so miserable and angry


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## DTO (Dec 18, 2011)

EleGirl said:


> It’s usually a very bad idea to file married but separate as there is usually a HUGE penalty in that the tax rates are even higher than if you file just plain single. There are also deductions that you can take if you file married joint or single that you cannot take if you file married but separate.
> 
> When I do taxes for people who have filed for divorce, but the divorce is not final, I run it both ways. Married joint and married separate. In every one I’ve ever done the taxes are much higher filing married separate. So it’s in both of your interests to cooperate and file jointly.


Being able to cooperate is a huge if. She has already proven to be dishonest in financial dealings. It would have to be a large amount of financial savings to risk signing any joint declaration with her, IMO.

Also, there are more options than filing married joint or married separate, if I recall correctly. The OP should look into whether he would qualify for filing as head of household (amount of time spent living apart, number of days having the kids).


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## DTO (Dec 18, 2011)

845dad said:


> here are some numbers to help with some you the ideas here
> 
> my income 150k
> hers last year 18k ..but as a BSRN she is easily capable of making 100k in the hudson valley. this year i figure she will make 45k
> ...


You owe more than 2k in taxes. The penalty is a standard 10% for early withdrawal. That 20k becomes income just like your salary. So, you guys earned $168k this year. But your income for tax purposes is $188k. That income level probably puts you at the 25% federal tax bracket, plus state income taxes. 

That income level means you may start losing deductions to which you would have been entitled at a lower salary, such as the tax credit for children under 13, and the dependency exemptions.

Realistically, that $20k 401(k) balance is more like $11k net (at least with tax rates here in CA). You've had $4k withheld but will owe another $5k at tax time. Your wife screwed you both over by cashing it out. 

Do your best to make her eat that tax hit presently (not at some point down the road when the IRS wants its money by 4/15).


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## 845dad (May 28, 2014)

Well talked to the lawyer wednesday and here are the main points. I work a very weird schedule its a rotating 12 hour shift some days some nights and 4 8 hour days every 5 weeks..well the schedule we are proposing is 19 out of 35 days..and I would only need to find day care 4 mornings during this 5 weeks. We also proposed that we each pay for food while we have the kids and pay for medical and other expenses pro rata 75/25 for now. We sent this over to her lawyer and are next court date is Feb 6...I'll keep you up to date...Would be so nice is she would at least discuss any of this instead of its up to the lawyers to figure out...Its like dealing with a child.


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## EleGirl (Dec 3, 2011)

DTO said:


> Being able to cooperate is a huge if. She has already proven to be dishonest in financial dealings. It would have to be a large amount of financial savings to risk signing any joint declaration with her, IMO.
> 
> Also, there are more options than filing married joint or married separate, if I recall correctly. The OP should look into whether he would qualify for filing as head of household (amount of time spent living apart, number of days having the kids).


If one files married single, the other cannot file head of household.


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## DTO (Dec 18, 2011)

EleGirl said:


> If one files married single, the other cannot file head of household.


You are right, as they lived together for most/all of the year. I think they might be able to do it otherwise.

Not sure though. The HOH rules are complex, and here in CA the state is pretty good about auditing people who take the deduction.


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## 845dad (May 28, 2014)

Well had our second lawyer four way...if any of you have ever argued with a tired 4year old you will understand...argued about the proposed schedule for 15 based on one day where I said I'd take the kids at 8am..she argued I'd be too tired after that Midnight shift...but agreed to let me have them at 3pm...then argued about paying common expenses ..I said..let me get this straight...we are paying 800 a ****ing hour between these two lawyers and you are arguing the price of milk?:....so She agreed to a schedule.but more She is saying that it's not fair and she is not going to agree to it...what is the point of all this...should I just ask for this to go to trial...oh yeah the schedule had me having the kids 19 out of 35 days...I told her 28 percent of gross is out of the question...She really doesn't get it..sorry if I seem scattered just so over this situation


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