Supporting documents for a client

[Dan]

Question:  What supporting documents do I need from a client who separated from her husband in November 2022?  I understand she has a divorce decree but am wondering if I need that to do her taxes, and does it need to be sent to the IRS? 

1.  She has a son in college

2.  She took out a loan on her home and paid half of the appraised value to her former spouse

3.  Is form 886-H-HOH required to be sent to IRS

4.  Can she file as HOH (Head of Household) 

5.  What other documents do I need

Thanks for your reply to these questions.

 

[Yardley CPA]

Hi, Dan....a bunch of items to address here:

1.  Is the son studying accounting?    Does the Divorce Decree discuss who can take custody of their son and when?  

2.  So she owns the former joint home outright?  This was done when in 2022, November or December 2022?  Does the Divorce Decree discuss their home or real estate taxes at all?  Does the husband plan to take any real estate taxes on his return?  May not matter if they are both claiming standard deduction but worth asking in my opinion as there may be a state benefit.   Any mortgage interest...sounds like it may be nominal at best for the loan your client took out but was there a prior mortgage?

3.  I've never filed form 866-H-HOH.  I'm not saying that I was correct in not filing the form, I just never have.  I've never been questioned once when claiming HOH for a client and the IRS has never required any verification.  So maybe others more versed in the form can provide guidance.

4.  Guide to Filing Taxes as Head of Household - TurboTax Tax Tips & Videos (intuit.com)  <~~ This may help on the HOH question. 

5.  I don't think you need any other documents as long as you have all the information/documents that impact her return.  

Good luck. 

[Lee B]

According to the AICPA's Malpractive Insurance Provider, Divorced clients are one of the leading source of legal claims against CPAs,

due to a conflict of interest between the 2 ex spouses. How do you provide accounting and tax advice that's fair and equitable to both ex spouses

especially when one spouse is your primary contact?

Two years ago I sent termination letters to two clients who were in the midst of getting divorced when I discovered that the spouse that was was my primary

contact wasn't being truthful about their situation.

 

 

[Dan]

Thanks Yardley.  The home was completely paid off by the couple in 2022.  She took out a loan to pay his share of the home in 2022 so she could live in the home.  I haven't seen the divorce decree.

[Medlin Software, Dennis]

If you were representing the union before, it will be a risk to pick a side after the breakup of the union.  It likely can be done, will no doubt require extra time to make sure one is not violating privacy of the union, or either former member of the union.  Might be a case where taking on an extra 10-15% for the retained client, at least for the first year or two, may be needed to cover your extra time.  IRC, I have seen here at least some refuse to represent either after breakup of the union, because of the risk.  I can see where it would not be uncommon to have to provide records for both parties, and even the one you elect to retain getting mad at :"helping" the other side.

I get something similar when a business is sold, and the new owner and former owner do not make a proper break in the employee records.  Many believe the new owner should have access to and responsibility for the employees for the full year.  The proper method is the former employer terminates all employees, and the new owner hires any employees they desire, even if they are former employees of the prior owner.  All too often, the former owner provides employee data to the new owner, which is never allowed (although there may be specific exceptions I suppose).  I had to fire myself and rehire, after incorporating.  I had to make sure I collected I9, W4, etc, from myself as a new hire.

[Pacun]

You don't need to send anything to the IRS, just the forms needed for a regular case. 

If she has a final divorce dated in November 2022, you will need to know if she maintained the home, which was the main home of her child for at least 6 months in 2022. It will be nice if age of the child was provided and if he was full time student. Assuming he is 18, no need for full time student status. So you need to concentrate on who maintained the home from Jan to Sept and is she maintained it for 4 months (plus nov and dec), and it was the main home for child, she can claim Head of Household even if the other parent claims the child.