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When a divorce or separation proceeding leads to criminal tax concerns

Marriage is always a sweet affair that may lead to couples raking up investments and even debt as they seek to build a life together. However, separation or divorce presents some challenges that may lead to criminal charges. How is this possible? You are probably wondering. Divorcing couples caught up in the emotional turmoil of a separation often overlook the legal and financial implications of dividing their assets. Even in such times, it is prudent for divorced couples to understand the tax implications that may arise during custody arrangements, property division and even child support agreements

Potential tax traps for couples in a divorce or separation settlement

While there are a lot of both individual and even business tax exposures that arise from divorce, there are a couple of issues that could present civil and even criminal tax consequences.

Tax evasion

Most divorce cases often involve two parties that feel wronged. This leads to extreme emotions from both parties and accusations made at this point may have far reaching consequences beyond the divorce settlement. State law requires that financial information from prior years be disclosed. It is not uncommon for your spouse, their opposing counsel and forensic accountant to accuse you of tax non-compliance. If a judge feels that there is some form of tax evasion with regards to understated income, funds held in offshore accounts and overstated deductions, they can contact the IRS to open an investigation.

Tax fraud

A lot of people believe that they are unlikely to commit tax fraud but the sense of betrayal and emotions invoked during a divorce can cause you to make some unwise decisions. There are many cases of one spouse understating their assets or even hiding their wealth overseas to ensure that their spouse gets very little assets in the divorce settlement. Such an act may lead to various counts of both tax evasion and wire fraud. Hiding assets overseas may also culminate in additional penalties for failing to disclose foreign income according to FATCA and FBAR.

How can divorcing parties prevent criminal tax charges?

A good divorce or family lawyer is a great choice when one wants to have an amicable divorce settlement. However, when the separation settlement starts to present some potential tax criminal issues, it is prudent to get the services of a good tax attorney. Your divorce lawyer is not likely to take up your case out of fear of malpractice charges and the possibility of the attorney being implicated. It then becomes important for the separating spouses to reach out to a tax attorney that can ensure that the divorce proceedings do not pose any criminal tax risks to the spouses.

Conclusion

A lot of secrets come out during divorce proceedings, especially if one partner is not contented with the asset sharing process. This can easily turn into a criminal tax matter with one or even both parties facing prosecution. The only solution is to hire the services of a reputable tax attorney to handle the matter.

Contact an Attorney

If you are struggling with any of the issues discussed here or need to talk to a tax attorney for any other reason, contact the attorneys at Ayar Law for free, no-obligation tax advice.

Venar Ayar, Esq.

Venar Ayar, Esq.

Attorney-at-Law, Master of Laws in Taxation
Principal and founder, Ayar Law

Venar is an award-winning tax attorney ranked as a Top Lawyer in the field of Tax Law. Mr. Ayar has a Master of Laws in Taxation – the highest degree available in tax, held by only a small number of the country’s attorneys.