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Tag: savings

The Difference Between IRAs

In divorce actions, be sure to distinguish between the different tax treatment of Roth and traditional IRAs. Investopedia.com stated it clearly and concisely: “The traditional IRA allows you to contribute a portion of pre-tax dollars. That reduces your taxable income for the year while setting aside the money for retirement. The taxes will be due as you withdraw the money. The Roth IRA allows you to contribute post-tax dollars. There are no immediate tax savings, but once you retire, the amount you paid in and the money it earns are tax-free.”

https://www.investopedia.com/retirement/roth-vs-traditional-ira-which-is-right-for-you/

This means that a dollar in a traditional IRA is not worth the same as a dollar in a Roth IRA. Bear the tax consequences of funds in traditional IRAs and in Roth IRAs when you divide marital assets.

Utah Family Law, LC | divorceutah.com | 801-466-9277

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Can one spouse or the other avoid paying taxes on a joint tax?

Can one spouse or the other avoid paying taxes on a joint tax?

Tax law does not require married couples to file joint income tax returns simply by virtue of being married. So there is no such thing as a “joint tax” in that regard.

Spouses have the option of filing jointly or separately but are not required to file jointly.

Most married couples choose to file their tax returns jointly because there are generally greater tax savings and refunds available to those who file jointly.

This article also has some very interesting, very useful information about when it may make sense for a married couple to file their income tax returns separately. I have provided some excerpts below.

When married couples should file separate tax returns (by Ray Martin, CBS MoneyWatch)

https://www.cbsnews.com/news/when-married-couples-should-file-separate-tax-returns/

Unreimbursed medical expenses

“Unreimbursed out-of-pocket medical expenses can be claimed as an itemized deduction for amounts that exceed 7.5 percent of the taxpayer’s adjusted gross income. But if a couple has AGI of $140,000 and one spouse has incurred $10,000 of out-of-pocket medical expenses, none of these medical costs are eligible because they don’t exceed the 7.5 percent threshold, which in this example would be $10,500.

“However, if this couple files separately and the one who incurred the medical expenses of $10,000 has AGI of just $30,000, then $7,750 of the medical expenses could be eligible. Combined with other allowable deductions (charitable donations, mortgage interest, the SALT deduction limit of $5,000 for a married separate filer), this could significantly exceed the standard deduction for separate filers, which is $12,000 for each.

You don’t trust your spouse

“A very good reason good reason to file separately is because you don’t feel comfortable signing a joint tax return with your spouse, which both spouses must do when filing jointly. When you file jointly, you take full responsibility with your spouse, and both signers are responsible for the completeness and accuracy of the entire tax return, and each will each bear full responsibility to the IRS for any additional tax, penalty or interest due on an incorrect tax return.

“If you don’t want to merge your tax life with your partner, choosing the separate filing status offers a degree of financial protection because you’re responsible only for your own separately filed tax return.

Separated spouses

“Another good reason to file separate tax returns is that you and your spouse live separately but aren’t yet divorced. In that case, separate returns can help keep your finances separate. This can be especially beneficial if one of the spouses can qualify for head of household status because he or she is supporting the dependent children.

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The marriage penalty

“Another closely related tax topic involving marital status concerns the so-called marriage penalty. It refers to the situation when two people with the same income would pay more tax if they get married and file a joint return than if they stay single and file separately as singles.”

To find out whether it makes sense for you and your spouse to file separately or jointly, it’s worth consulting an accountant or tax preparer now, so that you are prepared to file your best return come April 15th. The fee charged for a consultation is well worth it for what it can save you in taxes.

Utah Family Law, LC | divorceutah.com | 801-466-9277

https://www.quora.com/Can-one-spouse-or-the-other-be-able-to-avoid-paying-taxes-on-a-joint-tax-Is-that-considered-fraud/answer/Eric-Johnson-311?prompt_topic_bio=1

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Which is more likely to cause a marriage to end in divorce – too much money, or not enough?

Which is more likely to cause your marriage to end in divorce – too much money, or not enough?

The perception of not enough money.

With, perhaps, the rare exception of a couple in which one of the spouse’s is totally disabled, there is almost never not enough money to sustain a marriage or family.

A married couple can almost always live more cheaply together than they could apart, so when a couple (and their children, if there are children) is dangerously poor and one of them accurately blames the other for their plight, it is because one of them is not pulling his/her weight.

When a couple’s/family’s income is sufficient to meet their needs, then if the marriage breaks up over “not enough money” it could be because 1) both spouses mismanage their money; 2) one of the two spouses mismanages the money; 3) one of the two spouses has an unrealistic view of how the money should be spent.

When a couple’s income is more than sufficient to meet their needs, then if the marriage breaks up over “not enough money” it is usually because at least one of the spouses has a problem that he/she/they believe(s) spending money will cure or numb. The divorce arises when either:

  • the overspending leads to insolvency (this is when people start buying expensive vehicles and other items on credit, gamble, and otherwise live beyond their means in the hope
  • that getting all the fancy stuff will ease the pain. It’s a very easy trap to fall into); or
  • even though there is still plenty of money to meet their needs and them some, one or both spouses realize(s) that “there ain’t enough money in this world that could keep us together.” In other words, in such a situation the problem isn’t too much (or too little) money.

Precious few of us will ever have more money than we know what to do with. So know that if money is a concern in your marriage, you’re in good company.

If Uncle Eric may offer his brief statement of a remedy to most (not all, but most) marriages that struggle over money issues:

  • you need to take “to have and to hold from this day forward, for better for worse, for richer for poorer, in sickness and in health, to love and to cherish” seriously. You need to make your marriage more important than either of you alone (because it is). You need to consider every dollar of each of your earnings “ours” (legally it is—your spouse owns with you everything you earn and vice versa) and each of you needs to view spending the marital income wisely as a solemn duty to the other.
  • You need to live within your means (for many couples setting and sticking to a budget is all the marriage therapy they needed).
  • You need to make spending decisions on most things jointly (each of you must have a little money to spend as you choose, but major purchases need to be jointly made).
  • You can’t have secrets from each other when it comes to income and spending money.
  • You need to save a portion of your income for emergencies and for future needs and wants.

Do these things with a sincere heart (even when it’s tempting not to do them) and your marriage will not break up over money.

Utah Family Law, LC | divorceutah.com | 801-466-9277

https://www.quora.com/Which-is-more-likely-to-cause-your-marriage-to-end-in-divorce-too-much-money-or-not-enough/answer/Eric-Johnson-311

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