Income Tax Information Used in Family Law Cases

This article was originally printed in the ABA Section of Family Law eNewsletter, February 2014.

Income tax returns and supporting information such as W-2s and pay stubs are the most common and basic documents which evidence income in family law cases. This article discusses the sources of income that are disclosed on a personal income tax return (Form 1040), and some ways the items can be evaluated to search for hidden income and hidden assets.

  • Wages – The figures reported on the income tax return should be matched to the W-2. The W-2 and the pay stubs will provide additional information on the employers, pay rates, total pay, certain benefits, and taxes withheld. Additional analysis may include tracing bank deposits to ensure that all wages were used for the benefit of the family.
  • Taxable Interest and Tax Exempt Interest – These items of income must be considered when calculating income available for support. They are also important because they can point to bank, investment, and brokerage accounts that may not have been specifically disclosed in the family law case.

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This comment was left on WalletPop, AOL’s personal finance blog. He was responding to a thread on hidden taxes and an ongoing discussion there.

Our current tax system is so complex that many of the taxes we pay are in fact, hidden from us. Consumers often rant about how big naughty corporations should pay their fair share of taxes. Yet the truth is that those taxes on corporations are actually paid by consumers. It’s just done in a convoluted way that obscures who’s really paying!

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