As family law attorneys, we often think of income taxes as a means to review income and available assets as we go through the case. It is only at this time of year where, for most (if not all) of our clients, we also need to think about the potential income tax return and refund.
It is important to note that if you are in a contested divorce situation, then your attorney should at least consider asking the court for a restraining order with regard to spending the 2011 refund. Specific options include restraining the parties from cashing the refund until further order of the court, or perhaps more commonly, asking the court to order that the funds be deposited into an "escrow account" so that those funds are not spent without an agreement of the parties or by further court order. A restraining order can also be useful in child support cases that have not been running through the Child Support System. (Those child support cases which are running through the system should be intercepted if someone owes money to the custodial parent automatically.)
Parties can be tempted to file together without speaking to their attorney because the case is in the early stages, there aren't any issues yet, or the promise of "quick cash" is alluring. However, doing so could be a mistake for tax reasons, as well as the fact that the funds could be easily deposited into a joint account, and then removed by one party. It is much easier to "hold" the funds, than it is to "chase" the funds.
If you have questions about your income tax refund and you are in the process of a divorce, contact your attorney and ask the question. If you are thinking about a divorce and are not sure what to do, call us at 401-841-5700 or go to www.CounselFirst.com.
***WE DO NOT GIVE TAX ADVICE, BUT WE CAN POINT OUT POTENTIAL PITFULLS AND NOTIFY YOU OF THE ISSUES SO YOU CAN ASK YOUR TAX EXPERT THE CORRECT QUESTIONS.***
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