In this episode, we'll dive into tax season, planning for spring and summer, reviewing a parenting plan, and options for payment plans for legal or mediation services.
If you're contemplating how to file for taxes during your family law matter, how to be prepared for summer season, and how to be financially prepared for mediation or legal services, be sure to listen to this episode first! For legal assistance or mediation services, contact us at (630) 891-2478 or at www.birtlaw.com.
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Illinois Divorce Planning & Tax Returns: What You Need To Know
[00:00] Erin Birt: Welcome to the Restorative Divorce podcast, where we focus on all things divorce and parenting related to help you find clarity, stay informed, and stay out of family court. With 20 plus years of family law experience, our attorney and mediator, Erin Birt, has seen too many times how family court will negatively impact your health, your relationship with your kids, and your wallet. This podcast aims to turn that around and empower our listeners to take back control of their family law process and their lives by working with divorced professionals that seek to help and not hurt. Our goal is to provide you with expert tips that you can implement today to restore your finances, emotional wellbeing, and coparenting skills. Of course, our team at birtlaw.com is always here to customize a restorative divorce plan for you, but for now, listen to this episode to get help today.
[01:04] Erin Birt: Well, thank you for joining us for our complimentary gathering where we talk about divorce and parenting matters and answer some general questions that may have come our way during the last week. My name is Erin Birt. I am the attorney and mediator here at the law firm of Erin Birt and I am joined with my other team members, who I'll let you guys introduce yourself.
[01:28] Tyler Birt: Sure. My name is Tyler Birt. I am paralegal and office manager at the firm.
[01:34] Karen Hansel: Hi, I'm Karen Hansel and I'm the administrative assistant for the firm.
Illinois Divorce & Tax Season
[01:39] Erin Birt: Well, thanks for being here, everybody. We were talking a little bit earlier about the season we are in and the season that our clients find themselves in, and that is tax season. And a lot of clients are concerned right now as to what should they do about filing tax returns. And so we'll talk briefly about that and how we can give you some ideas or tips and also point out how we can help you through that process. But generally speaking, just a quick disclaimer that I am not a tax attorney, neither is Karen or Tyler. I am also not an accountant, but I do help you with financial matters as it relates to your divorce. And so information that we will talk about today is based on our experience, based on Tyler's experience as an accountant. But just know that we are not providing any type of tax or financial advice, but we are going to cover this topic because it is related to your divorce and it's just on a lot of people's minds. “What should I do while I'm going through a divorce or separation and knowing that I need to file my tax returns in the very near future?” So Tyler, I'm going to turn it over to you to maybe go over that topic and maybe if you have any tips for anybody listening, if they find themselves in this similar situation, sure? I appreciate it.
[03:18] Tyler Birt: Every year around this time, the question comes up, especially in our business: filing tax returns and getting a divorce. They are two things that don't necessarily complement each other. Because as it pertains to tax returns, we look at, accountants look at and CPAs in general, we'll look at what is the best way to reduce overall tax burden. The law says that you are required to pay all taxes owed. You don't have to pay more than what is owed. And so, as accountants and tax professionals, they look at generally the best approach to reduce overall tax burden.
Now, as you know, in a divorce proceeding, the overall tax burden is not necessarily the driving factor for filing tax returns. Couples are going through life changes and they may not like each other right now. There's various factors that go into filing tax returns, be it income, how is income earned, are there dependents, are there tax deductions? And generally in a marriage, there are obviously different situations, but the majority of married couples will file a married filing joint tax return, which is a requirement. There are a couple of different options that must be chosen. One of the options must be chosen when you file a tax return, and married couples would generally file a joint return that takes all income from both spouses into account, all deductions from both spouses into account, however they are earned.
However, when you're getting divorced now, you need to look at the rules for divorce, and you can correct me if I'm wrong, and the rules for the IRS: You are either married or not at the end of the year on December 31. You're either married or you're not married. And that plays into: not all divorces end on December 31 and make it easy for the next tax season when taxes are due.
So a lot of different things come into it. Again, as I stated, tax professionals want to reduce overall burdens, especially couples with dependents, meaning children, depending on how the two couples, or the two spouses, depending on how their relationship is can really drive different things with tax returns: Somebody wants to claim all of the kids. Somebody wants to claim some of the kids. Erin, you can speak to it on the legal side of those cases. If you have multiple kids or one kid, somebody can claim one one year, somebody can claim one the other year, and those are all things that can go into the divorce.
I think a couple of tips I could provide is, depending on your relationship with your spouse for tax purposes only, it is in the best interest of both of you to work together to reduce the overall tax burden. I think that paying more to the government isn't necessarily the best approach just to feel better about one person getting more or less when you're filing tax returns. So communication, I think, in this arena and as we know overall in the divorcee process, is key to understanding and coming up with the best solution it is obviously best to work with your tax professional. They can provide you more detailed analysis of the difference between married filing joint returns and married filing separate returns. Because, again, if you are married at the end of the year, you are married for tax purposes. So you either file a married filing joint or a married filing separately. There's just different tax consequences to filing one or the other. Communication and working together for this purpose is generally the best approach to reducing your overall burden.
[08:55] Erin Birt: Yes, thank you for sharing all of that, Tyler. And there's a couple of points that I can piggyback on that you brought up in the divorce world.
Avoid the Illinois Divorce Court Rush in December
December can be a mad rush in the courthouse, and that's for a couple of reasons. One, holidays. So on the parenting side of it, people, if they can't reach agreements, are rushing off to the courthouse to try to figure out winter break or upcoming holidays. But also a lot of people are trying to rush the process in December because of that marital status determination on December 31.
So you have often parents trying to get into court because of parenting issues and financial issues, and then you might have couples that don't have children trying to get into court. And then you've got the competing factor of judges not wanting these emergencies because December 31 comes every single year.
And so it's important to recognize that, yes, the way you file is going to be determined, your marital status is going to be determined, on December 31. So if you're still married, you've got those options that Tyler brought up that you have to consider. If you are divorced December 30, you can file an individual tax return for that year because on December 31, you were single.
So things to consider just from a divorce perspective is that courts do not view some of these things used as a rush to get divorced by the end of the year an emergency. They're usually already well booked up in advance because everybody else is anticipating wanting that divorce done before the end of the year for financial and parental reasons.
Tyler, you also brought up just some legal issues about deductions or dependents and without going into it too much, but generally speaking, your tax return preparation could be influenced by several legal issues. It could be influenced by if there's a child support obligation, and if the payor, the person that is paying child support, if they are current or if they have an arrearage. And an arrearage is: do you owe money to the other parent? Sometimes that comes into play when there's not an agreement otherwise as to how to claim the child or children. The court will start looking at child support amounts that are owed.
And they also will look at the amount of time that a parent spends with a child as to what's the default for claiming that child as a dependent. Typically speaking, people will reach agreements. They will alternate children as dependents. Somebody will claim one, the other will claim another. A lot of times you find that they just reach an agreement unless they're in that kind of outlier where there's a financial disparity, where it benefits one party or the other, there might be additional analysis as to who claims what does that benefit look like, how does that then get spread out between two households? So there are many complexities if it's not resolved by agreement. And again, it really comes down to your marital status on December 31. So that's your starting point.
[12:37] Tyler Birt: Yeah, I think I will just add that, just like you said, if you're divorced on December 30, you are then required to file an individual tax return. You cannot file a married filing joint or married filing separately. You can file, there is another option, though, right? If kids are involved, there is a head of household status, and that is for individuals that have children or dependents, not necessarily children, but do have dependents. So it's not just a single, you know, designation. There is another designation which provides a different tax bracket and allows for certain things that happen that individual tax preparers or tax individuals don't have. But, yes, you're right. You're married or you're not, right? You don't get to choose what is best is for you. You have to choose based on the rules of the IRS.
[13:50] Erin Birt: Right? So if these questions are coming in from clients or parents, what to do? Again, that disclaimer: We're not tax attorneys. We are not your CPA, we're not your tax advisers, but we can provide you guidance within the laws and procedures of the divorce or separation process. We always recommend that you have a trusted professional review your tax returns if you're preparing them at home, or take over that process so that they can advise you appropriately, especially in that first year after divorce. I tell all of our clients, even if you've done your tax returns all of these years, there are so many unique situations and things, nuances, that you need to either learn or discuss or go through. And if you've got children and you've got college expenses, you've got all of these things, it is always best to have somebody help you with that, especially in that first year post divorce when everything is different.
But, Karen, we were talking a little bit earlier about some of the things that you were saying you appreciate about the firm that we can help our clients, right, if they find themselves in these circumstances?
Join our Team or Before, During, And After Your Divorce or Separation
[15:17] Karen Hansel: Yeah, I agree. I think a unique part of the firm, is the network that both you and Tyler have with those professionals. That would be a good fit that we can introduce our clients to so they don't have to start out alone or be even expected to walk in the door with a professional if they don't have one, if that's part of the need or the consideration for their matter and how they want to work through the process. And that's something we can provide. So I think that's a nice offering to have because it's already kind of an overwhelming process because to your point, you've got all this tax stuff kind of circling right around you on top of the divorce itself. And that's overwhelming to kind of keep them separate, but running the parallel to get them both where they need to go. So that means a lot.
[16:01] Erin Birt: Yeah, I agree. And like you said, this overwhelming process, it spills over into every aspect of your life. And here we are, people are excited to probably get through the holiday season, and now we're in tax season. So another layer of complexity and other things to organize, think about. And if we can take any of that off of your shoulders and point you in a better direction and give you a trusted referral, we're here to help with that.
[16:35] Karen Hansel: Yeah, I think so.
[16:37] Erin Birt: This last week, trying to think if any other questions came through, have either of you fielded any questions that you think might be helpful for our listeners? Or do you have any questions that maybe I can perhaps answer to help any listeners?
[16:56] Tyler Birt: No, just recently with the tax season, we start fielding some of these questions throughout the week.
[17:08] Erin Birt: I agree. Yeah, it's on everybody's mind. And Karen, I apologize. I think you were about to say something.
[17:14] Karen Hansel: I think the other part of that is, because we are in tax season, then what usually follows is like, summertime. And usually that's when you have parents that may have some changes to how they look at their summer and maybe the parental time that they spend with their children. And that's where we kind of get into more, maybe request for mediation to kind of update those existing kind of working agreements as the family's change and activities change. So I think that's where we're kind of tipping into a little bit as well.
Spring: Annual Review of Your Illinois Custody and Visitation Plans
[17:43] Erin Birt: Yeah, that's a great point. I think a lot of families think of things in phases. They compartmentalize because that's just how they can get through all of life's challenges and everything that they're expected to do as a parent, as a worker, as a spouse, as somebody just going through a family process. And so yeah, so right now we're dealing with a lot of what do I do about tax season? We're coming up into spring. It's always a great time to take a look if you have an existing parenting plan to look and see what's ahead. Do we have summer camps coming up? Do we have holidays? Do we have vacations? Do we have a change in school coming up that we need to accommodate things? And I would say it takes a little bit longer than perhaps some people understand to review that. Take a look at your documents. If you need to provide notice to the other person that you would like to seek a review of that, you want to start getting that in process right now. Send them an email, send them in our Family Wizard or a talking parent message that you want to start reviewing these things. And also, if you get through tax season and things are settled down and you want to come in for mediation, we can always sit down and go through all of that in a safe place where you are compartmentalizing, again. You have one spot where you're focusing on what are some of these changes that are coming in summer or fall. But spring is a really good time to start taking a look at those schedule changes or your upcoming needs. We all know time goes fast and spring is a great time to just start looking ahead and seeing what we need to do for the summer and fall and be prepared for that.
[19:33] Karen Hansel: Great.
Illinois Custody and Visitation Payment Plans
[19:34] Erin Birt: I think the only other question then, if people are wondering about, okay, I'm getting through this period of my life right now and maybe I need to start some services, how am I going to do that? Perhaps this is not a financial obligation that I was expecting at this point in time, but I recognize I need some more assistance or I need a mediator to help facilitate communications with my co parent. And I just want to highlight that we have a web page, called Pay Now, but it has all of our payment information on there. And there's an option that not a lot of people know about in the legal community, you can apply for essentially financing for your mediation or your legal needs. And it's something called ClientCredit through Affirm. And it's a great option for people that are looking to pay that they need assistance, but they're looking to pay for services over time. Maybe they don't want to use a credit card, maybe they don't have access to that. Maybe they don't have the funds immediately because of the way they're paid, but they just prefer to have a payment plan or to pay overtime. And so you can go to our website, click on Pay Now, you can read about the various payment options and then mid page it talks about this ClientCredit process. There's a free downloadable form that can tell you more about that. And if you have any questions, you can also let us know. But I think it's a great resource for people that need services now but need to pay later so that they're not getting caught behind that or they're part of that group in December rushing to get in because they couldn't do something in spring or summer, you can have access to help now, check out ClientCredit. It's a fairly new thing that people don't know a lot about. So if that's a good option for you, we've got information on our website, and so hopefully that allows you to start addressing things at this point in time rather than further down the road when perhaps more changes have occurred in your family or with your children to put out there.
[21:57] Karen Hansel: It's a great point. Yeah.
[22:00] Erin Birt: Okay, well, any other questions or any other topics either of you would like to address today?
[22:06] Tyler Birt: No, not today.
[22:07] Karen Hansel: Not today.
[22:08] Erin Birt: Thank you. Yeah, well, thanks to both of you. I think we covered some great information today about your options and some tips for tax season and your options for reviewing your parenting plan and mediation. And then also some options for paying so that you can start that process sooner rather than later and address your needs when you need to address your needs rather than waiting until the end of the year.
[22:33] Tyler Birt: Sounds good.
[22:34] Erin Birt: All right, until next time. Have a good week. Thanks so much.
[22:42] Erin Birt: Thanks for listening to the Restorative Divorce podcast with your hosts, attorney and mediator, Erin Birt, and our paralegal, Tyler Birt. A special thanks to our contributors and to the authors of the many articles that inspire us and keep our clients informed. We hope you enjoyed our deep dive into the separation, divorce, or parenting tips covered today that you can use now to help restore yourself. If you strive to improve your life or the lives of your children after a separation or divorce, join us next week when we will cover more Restorative Divorce topics. You can head over to Birtlaw.com to get the podcast transcripts, follow us on social media, and even find more valuable family law information, all for your benefit. Get help today and work with us one on one. Contact us to set up a consultation or planning session to start rebuilding your life today. Enjoy this day and we'll see you next time.
Contact Illinois Divorce Attorney and Mediator Today
Contact us today: We can help you jump start your tax preparations, reviewing your parenting plan, and helping you have access to family justice now rather than later when issues have passed and effected your family. Join us for a consultation and planning session our next free zoom meeting.