Divorce expenses can soar, especially when spouses start suspecting each other of hiding property. Consider what happens when wives or husbands hire private investigators to track down assets concealed by their future exes. Fees to find those hidden assets can add up to many thousands of dollars.
Fortunately, there's a no or low cost source of information for spouses who are compelled to litigate their divorces or for already divorced spouses who seek to recover overdue payments of alimony or child support. And frequently the means for unearthing this information is tucked away in their file cabinets unbeknownst to those seeking the information. This is because still marrieds and ex-spouses can glean a good part of what they need from the separate schedules submitted with their jointly filed federal tax returns.
Indeed, a treasure trove of names and amounts that could considerably shorten searches for hidden assets can be found in the 1040 forms, as follows.
1. Check the Schedule B. This schedule requires listing the names of mutual funds, brokerage companies, banks and other sources of dividends and interest. At the bottom of Schedule B are questions about the existence of banks and financial accounts in foreign countries or foreign trust transactions. Not everyone will have a Schedule B, however. For those whose interest or dividend income is less than $1,500, the totals for dividend and interest income are listed on the first page of Form 1040. Taxpayers with bank or other financial accounts in foreign countries and those involved in certain foreign trusts have to continue filing Schedule B, regardless of the level of dividends or interest income.
If the dividend and interest amounts aren't listed on a Schedule B, this can make it harder to find out where the investments or bank accounts are. But just listing totals of interest and dividend income reveals that an ex owns assets that generate interest and dividends, at least during the year covered by the return. This, in turn, gives spouses endeavoring to find hidden assets a starting point for their quests.
2. Check the Schedule D. This schedule discloses capital gains and losses from sales of fund shares, individual stocks and other assets. Let's say an ex's Schedule D reports a profit or a loss from a sale of some fund shares. The details of the sale establish that he or she owned and unloaded those shares. Chances are the ex owns more investments.
3. Check the Schedule E. This schedule discloses income or loss from the following sources: rental real estate (including the type and location) and royalties; partnerships and S corporations (S corporations are companies taxed much the same way as partnerships are that pass profits or losses through to their shareholders, who pay taxes at their own individual rates); and estates and trusts.
So if Schedule E reveals rental income, it might be worthwhile to drop by the property. Ditto when there's partnership or S corporation income track down the outfit in question and ascertain whether it continues to generate income for the ex-spouse in question.
Should you be in the midst of a divorce or contemplating divorce, contact the Law Offices of Renee Lazar either through email or telephone 978-844-4095 to schedule a FREE one hour no obligation consultation.