Module 8 - Tax Implications in Divorce Fin Plan Flashcards
What is Bunching Deductions?
A tax strategy that involves ‘bunching’ itemized deductions so that they are high in one year and low the following year. The standard deduction can be used on the alternate year.
What is the Earned Income Tax Credit?
A tax credit under IRC Section 32 for custodial parents with a qualifying child that meets IRS requirements.
What does the Innocent Spouse Rule provide?
Tax liability relief for a spouse who signs a joint tax return and has no knowledge of the understatement of tax.
What are the requirements for the Innocent Spouse Rule?
- A joint return was filed.
- There was an understatement of tax attributable to erroneous items from one spouse.
- The innocent spouse did not know and had no reason to know about the understatement.
- It would be inequitable to hold the innocent spouse liable.
When must the innocent spouse elect benefits?
No later than two years after the date the IRS has begun collection activities.
What is a Personal Exemption?
A tax deduction for individual taxpayers and any qualifying dependents they support.
What does Section 7703(b) of the IRS Code state?
A spouse is considered abandoned when:
* They pay more than half the cost of maintaining their household.
* They file a separate tax return.
* Their household is the principal home of a dependent child for more than six months.
* They live separately from their spouse for the last six months of the tax year.
