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Unreported Income and Your Florida Divorce
If you operate a cash-based business or work for tips, you are still supposed to report all of your income on your tax returns. Income is income, and the IRS expects to receive its share regardless of whether you make your money in cash or deposit checks at the bank.
If you have not been reporting all of your income on your tax returns (or if your spouse has been underreporting his or her income), this could create some issues during your divorce. Continue reading to learn more, and feel free to contact one of our divorce attorneys for a confidential consultation.
1. Your Underreporting Could Become Public Record
Generally speaking, divorce proceedings – like all other court proceedings – are open to the public. Filings and rulings are public record, and there is nothing to stop someone from going to the courthouse as an observer. Now, this is the general rule. To protect their privacy, divorcing spouses can seek to have their divorces filed “under seal,” which keeps them out of the public record, however, this is currently difficult to do based upon our current law .
The judge may feel compelled to report your undisclosed income to the state and the IRS – and of course your spouse could choose to report you as well. In short, if you have not been paying your taxes, this may be something you need to address in connection with your divorce.
Importantly, if your spouse has been underreporting income without your knowledge, you can seek protection from liability for back taxes. The IRS provides more information on its website, and this is something we can help you with as well.
2. Establishing Alimony and Child Support
The next issue you can run into with unreported income in a divorce involves establishing alimony and child support. Both of these are based (in part) on the spouses’ respective incomes, and if you do not have evidence of what you or your spouse earns, this can make it extremely challenging to establish support rights and obligations. Documentation of unreported income can many times be proven from proof of expenditure and an analysis of the parties’ lifestyle. It is important to maintain documents. Sometimes in these situations, it may be helpful to hire a forensic accountant who can uncover the unreported income.
3. Valuing Your (or Your Spouse’s) Business for Purposes of Equitable Distribution
If you or your spouse owns a company that has been underreporting income, this can also make it challenging to establish the value of the business. Businesses are subject to equitable distribution in a Florida divorce, and in order to determine what is equitable, you first need to know what the business is worth. Similar to uncovering unreported income, a forensic accountant may be able to assist in placing a value on a business with unreported income. That way, you can make sure you receive your fair share in your divorce.
Are You Considering Filing for Divorce in Florida? McMichen, Cinami & Demps Can Help
While unreported income will add a layer of complexity to your divorce, the issues it creates can be overcome. At McMichen, Cinami & Demps, we have decades of experience helping spouses address these and other complex issues while dissolving their marriage. For more information about how we can help, please call (407) 898-2161 or complete our online form today.