Ask the Expert: Financial Planner

CARL PALATNIK, CFP, CDFA

Please send your questions to Carl Palatnik.Because of the large volume of mail and the sensitivity or specific nature of some issues, it is impossible to post answers to all of your questions in this column. As time permits, and if you so indicate, I will try to send a few personalized responses. DivorceInteractive.com has a strict Privacy Policyand will not post your name or contact information or share such information with any other person or entity without your permission.

Q: My wife and I have agreed on most things but seem to be stuck on who should claim the children on our tax returns. I feel that I’m already paying her a lot of money in child support and that enough is enough. She says that the children are staying with her and that she is the one who will be taking care of them most of the time. Also, because she is making less money than I am, she needs all the help she can get. Yet, I’m the one providing most of the financial support, I’m the one paying the most in taxes and they are my children too! What should we do?

Q: Things have been really tight since my husband and I decided to divorce. One of the things he has done to bring home more money from his job is to change his withholding taxes, and I’m pretty sure that we will owe a lot of money when we file our tax returns. I suspect also, but am not sure, that he does not intend to report the income from his side business. He wants me to file jointly with him. He says that it will save us a lot of money in taxes and that he will take full responsibility for any taxes that might still be due. Despite our pending divorce, he is a good man, and I believe he has every intention of keeping his word. We are also still openly communicating, which is important to me for the sake of the children. Still, I’m worried that despite his best intentions he might be in over his head, and getting deeper. What are the risks to filing jointly. It would only be for this one year?

A: You have raised an important issue. The fact is that you and your husband are still financially linked. With such connections come certain risks. If you and your husband file jointly and he is unable to pay the taxes due, a possibility since he seems to be having some financial difficulties, the IRS will presume both of you responsible for the balance due and may attempt to collect any unpaid taxes from you. While in some cases you might eventually be able to get relief, there are no guarantees. Even if you were, IRS collection activities can be harsh and insensitive, and it is time-consuming and not always easy to reverse an action that has already been taken. In your case, it might be difficult to get such relief because there may be a substantial understatement of tax of which you had prior knowledge. The IRS will presume that you knew of the underreported income, and it will be up to you to prove that you did not. If you can’t, the IRS will hold both of you responsible for the fraudulent tax return, even though the underreported income was his.