Reviewing a tax return may bring to light hidden assets
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Reviewing a tax return may bring to light hidden assets

| Feb 16, 2021 | Divorce

Tax season may become more complicated with marriage dissolution. According to Publication 504, the IRS considers a couple married for the entire year if they have not finalized their divorce by December 31. 

The issue of whether a couple files a joint or separate tax return may raise suspicions of hidden assets. A spouse who suddenly insists on filing separately may have a hidden stock brokerage account that he or she does not wish to disclose. 

Hidden assets may appear within tax schedules

As noted by CNBC, tax filings require listing capital gains and losses associated with an individual stock account. If a return requires a Schedule B, it may indicate that a spouse received interest income or dividends earned by holding stocks. Schedule D reconciles a filer’s capital gains and losses. 

A spouse who started a new business may need to file a Schedule C, which shows its profits and losses for the year. An unusual number of K-1 statements arriving in the mail may reflect income from a partnership or small corporation holding valuable property. 

Retirement accounts may reveal hidden income

Employer retirement plan contributions generally provide a way to lower an income tax liability. By making larger financial contributions, an employee may receive less taxable income to take home from a paycheck. While it may appear as though a spouse worked fewer hours for a smaller amount, these financial contributions qualify as community property in California. 

Because the law considers certain funds as “marital” assets, each spouse may receive half of the value of a retirement plan or investment account, even if only one spouse contributed to their growth. If it appears that a soon-to-be ex-spouse has hidden assets, a review of his or her tax filings may bring them to light.