There seem to be a few things in life you can just never escape. Death and taxes. Even when divorcing, you have to look at the value of your assets through the eyes of the IRS. This is important because in many divorce cases, assets are liquidated to satisfy the terms of property distribution. But, there could be tax implications depending on what you liquidate and how your assets are valued.
For example, liquidating a 401(k) or other retirement account to pay your spouse their part of property division could have immediate tax implications. For example:
- Early withdrawal of funds from a 401(k) often carries an additional 10% tax penalty.
- The funds you receive from the distribution are considered income and must be reported as such when you file your income tax return.
Depending… Continue reading