Article: Use tax returns to unearth spouse's hidden assets

Discussion in 'Chit Chat' started by TwoCatDoctors, Apr 26, 2011.

  1. TwoCatDoctors

    TwoCatDoctors New Member

    Huffington Post
    Posted: January 12, 2011
    By Julian Block, an attorney and author based in Larchmont, N.Y. He has been cited as "a leading tax professional" (New York Times), "an accomplished writer on taxes" (Wall Street Journal) and "an authority on tax planning" (Financial Planning Magazine). His latest book is "Julian Block's Tax Tips for Marriage and Divorce: Savvy Ways for Couples to Trim Their Taxes." His Web site is


    Divorces can be costly, from paying fees for lawyers or expert witnesses to appraisals of homes, businesses or other assets. The expenses soar when couples take their conflicts to the courts.

    Sometimes there's an added expense--finding hubby's hidden property. When wives hire private investigators to track down assets concealed by future ex-husbands, fees to find those hidden assets can add up to many thousands of dollars, as I can confirm from my work as a tax lawyer and investigator..

    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 returns. Look at these forms to get your fair share.

    1. Check the Schedule B: This schedule requires listing the names of mutual funds, banks and other sources of dividends and interest if the amounts involved exceed $1,500. At the bottom of Schedule B are questions about the existence of banks and financial accounts in foreign countries. When the amounts are less than $1,500, the totals for dividend and interest income are listed on the first page of Form 1040. Husbands with bank or other accounts in foreign countries and those involved in certain foreign trusts have to continue filing Schedule B, even if the amounts are under $1,500.

    When there's no Schedule B, it's harder for a wife to find out where the investments or bank accounts are. But just listing totals of interest and dividend income reveals that her husband owns assets that generate interest and dividends--a starting point in her quest to find hidden assets.

    2. Check the Schedule D: This schedule discloses capital gains and losses from sales of individual stocks and other assets. In other words, if the husband has listed profits from a stock sale, that establishes that he has owned--and unloaded--that stock. What was the source of the funds used for the purchase? Where did the sales proceeds wind up? What other investments might there be?.

    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; estates and trusts; and partnerships and S corporations (S's are companies taxed much the same way as partnerships are, passing profits or losses through to their shareholders, who pay taxes at their own individual rates).

    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 dear ex-spouse in question.

    What if the husband kept the copies of returns and won't let the wife see them? The tax laws make it easy for her to get around his stonewalling.

    For example, my client roster includes "Phyllis Neff," who's splitting from "Walter." Phyllis disclosed that she foolishly signed a blank 1040 when tax time rolled around each April. And this was the last time Phyllis saw or thought about her joint tax returns. When she became aware of the need for information about Walter's finances, he refused to give her copies.

    True, Phyllis can hire a tax professional to get the copies for her, but the hourly fees to accomplish that task might total into the hundreds of dollars, money that would probably be unnecessarily spent. Securing the copies is one chore she can readily handle without the need for paid assistance from a tax pro or anyone else.

    If the Neffs had their returns done by paid preparers, the easiest way for her to get copies is to contact the preparers. They generally have to keep copies for at least three years and provide them to any of the signers. But a preparer who wants to keep Walter as a client might make Phyllis wait a while for the copies. If that happens or there was no preparer, then Phyllis should contact the IRS for copies. She's entitled to them even if all the jointly reported income was Walter's.

    Phyllis simply signs and submits Form 4506 (Request for Copy of Tax Form). To ease her burden, it needn't be signed by Walter.

    She has to pay $57 for each return and should allow at least 60 days for the IRS to respond. Form 4506 cautions that the IRS usually keeps 1040s for no more than seven years. Copies of Form 4506 are available by downloading from its website,

    With a little digging and a little paperwork, sometimes those hidden assets can come to light.


  2. Mikie

    Mikie Moderator

    Was drive past his girlfriend's house to see the fleet of classic cars he had been buying to try to hide assets from me. Our mediator explained to him that half of those belonged to me and if he wanted to keep them, he had to pay me fair market value for half of them. The mediator also told him that if he tried to hide anything else, he might end up in jail or getting sued. That was a rude awakening for him.

    Love, Mikie