when filing married separately

[schirallicpa]

Does anyone have an agreement contract for this.  I am finding myself in the middle of too many divorcing couples where they are not on the same page.  I want a written agreement in place for the grey areas - confirming that they both agree to file separately, that they agree on who gets what deductions, and they agree on who gets which kids.  Any suggestions?  My engagement letters don't get into to this stuff.

[Lee B]

You do realize that dealing with divorced clients is one of the most common reasons that tax practitioners are sued ?

Check with your Professional Liability Insurance Carrier.

[Jack from Ohio]

Choose one, or choose none.  Those are the only safe methods of dealing with divorced couples.

[FDNY]

I would keep the one you like the most.  I know from past experiences, 2 in particular come to mind that dealing with divorced people will eventually present problems.  You have to be careful what you say to each of them as they will be telling you things about the other that you really don't want to hear as they try to make you take sides.   It becomes time intensive and you never get compensated enough for the hassles and risks. 

[BulldogTom]

I have a policy that I will not prepare MFS for divorcing couples unless it makes more sense for lowering taxes.  I sit them down and tell each of them that if they fight during the process I will not prepare either of their tax returns.  I will prepare the return based on the information and whatever way works best to lower the overall tax bill is how I expect them to file.  They tell me which account the refund gets deposited to and we go on our merry way.  If they don't like my rules, they can go on their merry way.

Tom
Newark, CA

[SaraEA]

That's harsh Tom.  Often one spouse controls the accounts and the other will never see any of the refund.  The bigger issue here is the conflict of interest--doing what's best for one may not be best for the other--a Circular 230 violation.  In our office the policy is to split the spouses between two preparers so one of us never does both.  Only exception is when the court has ordered that they file jointly (although I think that's an overstep of judicial authority).  Many places have written agreements both spouses must sign that they are aware of the potential conflict and want to proceed with the same preparer anyway.

[BulldogTom]

3 hours ago, SaraEA said:

That's harsh Tom. 

Maybe, but it is my practice and my rules and I don't get in the middle of a divorce. 

Tom
Newark, CA

[RitaB]

14 hours ago, BulldogTom said:

I have a policy that I will not prepare MFS for divorcing couples unless it makes more sense for lowering taxes.  I sit them down and tell each of them that if they fight during the process I will not prepare either of their tax returns.  I will prepare the return based on the information and whatever way works best to lower the overall tax bill is how I expect them to file.  They tell me which account the refund gets deposited to and we go on our merry way.  If they don't like my rules, they can go on their merry way.

Tom
Newark, CA

I think this is reasonable enough.  If two married people whose only filing options are MFJ or MFS both come to me for tax prep, I assume their goal is to achieve the best tax outcome for the family.  If they are feuding and carrying on and looking out for Number 1 only, they are going to two different preparers anyway, just like they're going to two different attorneys. 

I will say that If they tell me they are splitting up, and want to know about their individual liability, I have no problem figuring that.  I also don't mind directing refunds to two accounts.  But I assume they wouldn't both be in my office if they weren't interested in working together.

[Richcpaman]

I used to think that the proper course was to prepare the returns of divorcing couples so that the lowest tax was the result.  (Why should the IRS benefit from your marital issues???)

Then the spouse who didn't have any withholding took the refund that should have gone to the other spouse.  Even after agreeing not too....

So now, Its one spouse or the other for me. 

Rich

 

 

 

[Jack from Ohio]

I have a "One or None" policy.  Period.  Been collateral damage too many time trying to be a nice guy.  Divorcing couples are NEVER nice when it comes to money.

[Abby Normal]

3 hours ago, Richcpaman said:

Then the spouse who didn't have any withholding took the refund that should have gone to the other spouse.  Even after agreeing not too....
 

But now you can split the refund into two accounts. But still that's only if filing a joint return.

 

[Richcpaman]

4 minutes ago, Abby Normal said:

But now you can split the refund into two accounts. But still that's only if filing a joint return.

 

Joe:

Actually... It was before the split refund form was created.  I got burned early.

Rich

 

[Gail in Virginia]

And some banks will not accept the payment if both parties names are on the ACH but only one is on the account at the bank.  Or so I have been told.  They probably don't want to be in the middle of this either.

 

[Terry D EA]

I take the easiest position, choose one and not both. With that said, I have had divorced clients return to me after the divorce is settled and married filing separate is not an issue. However, I still approach this cautiously. Do what every you can at all times to CYA!!!

[Roberts]

I haven't had any client who were divorcing and insisted on filing MFS. It rarely is beneficial to go that route. I doubt I'd do either return in that scenario and just let them walk.

It's always amazing to me how often one will declare that they are working through the divorce amicably or post divorce they'll say they get along great. And then they take a deduction maybe they shouldn't have and you'd swear the shouting on the phone wasn't amicable.

 

 

[Catherine]

3 hours ago, Terry D said:

With that said, I have had divorced clients return to me after the divorce is settled and married filing separate is not an issue.

It can still be dicey if there are kids and dependency exemption and child care and tuition involved.  You can NOT do those returns without a chance of being caught - you can't, for example, TELL the second-to-come-in that the first already took the kids as dependents with a signed release that you now know the signature was cribbed.  Because that is disclosing confidential information.  So you're caught again.

It could work if their lives are now totally separate (no kids, or kids long grown and gone).  But scrutinize these cases with cynicism set at maximum - because one, the other, or both WILL throw you under the bus if there is a problem and they believe so doing will reinforce their personal stance.

 

[RitaB]

3 hours ago, Terry D said:

I take the easiest position, choose one and not both. With that said, I have had divorced clients return to me after the divorce is settled and married filing separate is not an issue.

I'm going to respectfully disagree (with just about everybody I think).  For me it's easier to do both returns or neither return when married people want to file separately.  I really need to know that both didn't claim the same kid or both didn't claim 100% of the mortgage interest.  I mean, IRS letters practically mail themselves when stupid crap happens.  I'm going with both or neither.

[RitaB]

On ‎1‎/‎9‎/‎2017 at 4:38 PM, schirallicpa said:

Does anyone have an agreement contract for this.  I am finding myself in the middle of too many divorcing couples where they are not on the same page.  I want a written agreement in place for the grey areas...

So I'm climbing out of the rabbit hole and saying, no, I don't have a written agreement for this.  And we did not mean to ignore the original question, we're just excited.  I am laughing so hard right now...

[FDNY]

6 hours ago, RitaB said:

I'm going to respectfully disagree (with just about everybody I think).  For me it's easier to do both returns or neither return when married people want to file separately.  I really need to know that both didn't claim the same kid or both didn't claim 100% of the mortgage interest.  I mean, IRS letters practically mail themselves when stupid crap happens.  I'm going with both or neither.

Rita, you are apt and daring, like a firefighter, knowing whether to go in or get out.  But most of all, smart!

[Terry D EA]

9 hours ago, Catherine said:

It can still be dicey if there are kids and dependency exemption and child care and tuition involved.  You can NOT do those returns without a chance of being caught - you can't, for example, TELL the second-to-come-in that the first already took the kids as dependents with a signed release that you now know the signature was cribbed.  Because that is disclosing confidential information.  So you're caught again.

It could work if their lives are now totally separate (no kids, or kids long grown and gone).  But scrutinize these cases with cynicism set at maximum - because one, the other, or both WILL throw you under the bus if there is a problem and they believe so doing will reinforce their personal stance.

 

Catherine, I totally agree with you. I only have one of these and we talked at great lengths. I initially told them I could not serve both of them. They agreed that I could and they would not cause any trouble.  So far so good. If a situation arises, I can still bail out before preparing either return. To address the OP, I think I may have investigated a written agreement for these situations but will still entertain another if someone has one. Thanks for the word of caution.

[Lion EA]

How can you do your fiduciary duty to both as well as one at a time?  Telling wife how much larger her refund will be if she claims all kids would "damage" hubby.  Or, telling hubby how much lower his tax balance would be if he filed MFS and itemized instead of MFJ and sharing the balance due or refund would damage wife.  How mad at you will one spouse be when the other spouse never chips in for half/a percentage of the balance due or never shares the refund?  And, making decisions to get the best result for the family as a whole will damage one or the other.

 

[Catherine]

3 hours ago, Lion EA said:

making decisions to get the best result for the family as a whole will damage one or the other.

Usually but not always.  I had some clients years ago who had filed for divorce in early January.  Separately, they each would have owed but together they got a sizable refund (weird situation in several regards).  I knew them well enough that, when they started to squabble in front of me about who got what, I told them that without the other they each owed, so shut up and split it.  Or take their papers elsewhere.  They shut up and split the refund.  

Again, very odd circumstances.