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Dealing with a post-divorce tax audit

The good thing about divorce is that it gives a former spouse the chance at a new start in life. But sometimes divorce brings issues to light that make it hard to leave the old life behind. Every year some divorced Colorado couples are likely to be reminded of their divorce when they get notice from the IRS of a tax audit on a joint return prepared during the marriage.

Most married couples file joint returns. The IRS gets notice of your divorce when your status changes to "single" or "head of household." Sometimes the change in status, coupled with the change in financial circumstances following divorce, can trigger an audit.

The best way to minimize the risk of a post-divorce tax audit is to take tax considerations into account when negotiating the property settlement. A family law attorney who is familiar with the financial nuances of high asset divorce cases, including the tax ramifications, can be invaluable in this regard.

Sometimes post-divorce tax problems arise due to problems created by the other spouse. If a post-divorce audit reveals that the other spouse was hiding assets, claiming improper deductions or failing to disclose income during the marriage, it may be necessary to raise the innocent spouse defense. In order to raise this defense, the innocent spouse must show he or she knew nothing about the other spouse's questionable conduct. The defense is often appropriate if one spouse handled the finances and was responsible for the preparation of tax returns while the couple was married.

Source: Forbes, "Divorce Causes Tax Audits," Cameron Keng, Feb. 10, 2014

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