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What’s covered in the book:
Picture a cozy household of three: just Brad Pitt, Angelina Jolie, and the friendly tax man. Fact is, whether Brad, Angelina, Jennifer, Bristol, Levi, Snooki or anyone else is hooking up, breaking up, or something in between, the odds and ends of their relationships are grist for the IRS mill.
“Tax Tips for Marriage and Divorce” shows everyone—whether single, married, living together, separated or divorced—how to save taxes for this year and even gain a head start for future years. It offers straightforward advice for all stages of relationships and throughout the year—not just when Form 1040 time rolls around.
For starters, the book leads off with “Your Questions/Julian Block’s Answers.” Using the question-and-answer format, it simplifies many difficult problems by presenting the usual questions clients ask, as well as questions people never think to ask—or ask only after it’s too late.
For example, couples planning to get hitched need answers to questions like these: “After we wed, what are we supposed to do about withholding from our paychecks?” “Does the IRS knick women for taxes on engagement gifts if they break their engagements?” Married couples need to know: “Is it more advantageous to file joint or separate returns? If we file jointly to save taxes and later are audited, will I be responsible for my spouse’s understatements of income and overstatements of deductions?”
“Marriage or Divorce as a Tax Shelter” explains why advancing or postponing the date of a marriage or divorce—by merely a single day at year’s end—can cost, or save, big bucks. Despite recent changes in the law, the so-called marriage penalty still can cause affluent dual-income couples to lose more to taxes because they are married than they would as two single persons with the same incomes. The much-maligned penalty doesn’t always make marriage a tax trap. The penalty morphs into a bonus when one spouse earns all the income or much more than the other.
“Having an Affair Can Be Taxing” discusses whether the IRS can exact taxes from women who receive currency, cars, clothing, dwellings, furs, gems and other valuables from men with whom they are amorously involved. What bedevils bureaucrats is that the Internal Revenue Code stipulates disparate treatment for compensation and gifts. Whereas one provision says payments received as “compensation for services” are taxed, another one says money or other assets received as “gifts” aren’t taxed. The key issue: whether these women are receiving taxable compensation or nontaxable gifts. It should come as no surprise that these gift-or-compensation clashes often wind up being resolved by the courts.
An example: The case that pitted the IRS against Leigh Ann Conley and Lynnette Harris, twin sisters and Playboy magazine models. Both became mistresses of the same wealthy widower, David Kritzik. David was in his late 80s when he rewarded each sister with cash payments of more than $500,000 over the course of several years. Were Leigh and Lynette recipients of nontaxable gifts and not liable for assessments of back taxes, interest and penalties? Or were they recipients of taxable compensation and stuck with paying the assessments? As corroboration that the cash was compensation, the IRS invoked a trifecta: Lynette’s description of her relationship with David as “a job” and “just making a living;” her derogatory statements about sex with him; and her complaint that she “was laying on her back and her sister was getting all the money.” Luckily for Leigh and Lynette, the IRS explanation failed to persuade the Seventh Circuit Court of Appeals, a tribunal one rung below the Supreme Court. The Seventh Circuit concluded that the sisters were “entitled to treat cash and property received from a lover as gifts, as long as the relationship consists of something more than specific payments for specific sessions of sex.”
The book cites other noteworthy wrangles that read even better than television reality shows. One dispute required a judge to decide whether a husband was entitled to deduct hefty legal fees for his divorce as medical expenses. The judge was unmoved by the husband’s explanation that his health had immediately improved after divorcing on his shrink’s orders. Another judge had to rule on whether a spurned lover can take a bad debt write-off for the cost of an unreturned engagement ring. The judge threw out the deduction.
“Unearthing Hubby’s Hidden Assets” reveals how still-marrieds and ex-spouses can use information on their joint returns to track down assets concealed by their present or former mates.
Based on Mr. Block’s experience as a tax attorney and investigator, he finds that many wives compelled to litigate their divorces, and already-divorced wives who seek to recover overdue payments of alimony or child support, are clueless about the wealth of no- or low-cost financial data that they can glean from 1040 forms and accompanying schedules.
One of his more memorable clients was a woman whose divorce proceedings had become horrendously prolonged and contentious. A dozen or so years ago, she shelled out $15,000 just to have a private eye tail her spouse, a medical professional and a serial philanderer. The sleuth discovered a safe deposit box rented by the husband in his aunt’s name and crammed with nearly half a million in greenbacks. That $15,000 proved to be savvy spending; unearthing the concealed cash compelled the husband to increase the wife’s divorce settlement. Wisely, he wanted to avoid court testimony about cash payments from patients—information about income unreported on tax returns that the judge might routinely have passed on to the IRS.
Couples planning to divorce will find answers in the book to the surprisingly complex questions regarding rules about which spouse gets to claim dependency exemptions for the children, home sales and other property transfers, and deductibility of divorce-related legal fees. As splitting spouses go through the divorce process, they often have to bargain and strike agreements if they want to avoid paying more than they have to in taxes. These uncertainties underscore how important it is to choose and implement strategies that can keep their taxes to the legal minimum—and, of course, out of trouble.
CPA Peter J. Reilly blogs on taxes at Forbes.com. Below is his take on the book.
A Book For Taxgirl To Bring To Bridal Showers By Peter J. Reilly
Bridal Showers traditionally involve giving gifts to future wives.
I just finished Julian Block’s Tax Tips for Marriage and Divorce. At less, than 25 bucks, it would be a pretty chintzy wedding present, but that wouldn’t stop me from giving it to the right person. I’m going to ask Forbes contributor Kelly Erb (a.k.a. Taxgirl) if she would bring a copy to a bridal shower. I think you have to be shameless about being a tax geek in order to blog about the topic, so you might as well go all the way and flaunt your geekiness at a shower.
The book actually goes into more than marriage and divorce. You could really call it the tax aspects of coupling and decoupling, but then someone might think it has something to do with railroad depreciation.
Overall, Tax Tips is a good read and will alert someone to most of the tax implications of intimate relationships. The author discusses the pro and cons of joint returns, making it clear that filing jointly is not a requirement, although it is often most advantageous. He discusses dependency deductions, including the clever idea of adopting your lover. Of the seven sections covering among other things marriage rules, tax consequences of divorce and home sales, my favorite was Oddball Situations. Mr. Block reviews the tax issues raised by relationships between ladies and generous gentlemen. That material is pretty amusing. It made me think of the song ”Gentlemen Prefer Blondes.”
Of course, a book like this is not meant to be and really cannot be used as the sole reference on any issue, but I think even experienced tax practitioners will come away from it having learned something. My recommendation that Tax Tips for Marriage and Divorce would make a good gift for someone contemplating marriage (or divorce) is shared by blogger and Villanova tax law professor James Edward Maule.
Terrific Resource about Divorce
Recently I was sent a copy of Julian Block’s Tax Tips for Marriage and Divorce. I highly recommend this book! It contains information your attorney or mediator may not know and helps you navigate all of the complicated tax issues surrounding property settlements, alimony, how to file taxes (jointly, separately, etc), whether legal fees are deductible, taxes on sale of your home, taxes on Social Security, dependency exemptions, and much more. For example, if you obtain an annulment, you need to go back and amend all tax returns from your marriage because an annulment makes it legally as if the marriage never happened, thus you were never entitled to file jointly. I’ve never heard an attorney apprise a client of this fact.
Block is a well-respected tax attorney and his advice is clear, easy to understand, and on point. This is a book everyone who is dealing with divorce needs.
From MAULED AGAIN
James E. Maule, a professor at Villanova University School of Law and Graduate Tax Program, blogs on taxes.
Julian Block Revisits the Intersection of Tax and Relationships, and More
Julian Block has a problem. He’s not the only one afflicted with it. It hovers over me, and many others. The problem? When we write things, in the back of our minds is the ever-present awareness that the next hour, the next day, the next week, the next month, can bring one or more changes that makes our words wrong. Tax law affects so many activities, and changes so often, that keeping up with it poses a challenge to taxpayers, tax professionals, and those who write about it. When someone is as prolific a writer as Julian is, a condition with which I can relate, keeping an assortment of tax books up to date is a never-ending task. Not unexpectedly, Julian rises to the occasion.
And so it comes to pass that eight months after reviewing the 2013 edition of Julian Block’s “Tax Tips for Marriage and Divorce,” I have been given the opportunity to look at his 2014 edition. Once again, Julian gives his readers good reason to replace the book currently on their shelves, and provides those unfamiliar with his books a reason to make room for his latest effort. Though it is a tax book, it’s a fun read. Julian has dug up all sorts of tax cases involving marriage, divorce, and an assortment of other transactions that offer stories just as easily at home in the scripts of soap operas and reality shows. There are cheaters and thieves, engagement breakers, mistresses and prostitutes, liars and shoplifters, sick children and cash hoards, and a variety of other tales of joy and sorrow.
As usual, Julian has produced a book that is practical, easy to read, and interesting. He gets many of his points across by using the question-and-answer technique, with the questions being easily envisioned as inquiries handed up by someone next door or in the next cubicle at the office. Julian deals with just about every tax issue that pops up when people create and end all sorts of relationships. He explains the marriage penalty and marriage bonus, filing status, alimony, property settlements, child support, death of a spouse, bad debt deductions for loans to spouses that aren’t repaid, legal fees, the impact of divorce and separation on dependency exemptions and the child tax credit, the tax consequences of residence sales by married couples, and the impact of social security benefits. Julian explains how tax returns can open the door to discovering assets hidden by a spouse before or during the deterioration of a marriage.
The book concludes with a chapter on withholding computations, a chapter on amending returns, and a chapter on using IRS publications. He addresses these concerns not only in the context of relationships but also as issues facing taxpayers generally no matter their relationship status.
As I noted with respect to the previous edition, the title of the book is misleading. It’s difficult to make the title of a tax book, or for that matter, a tax course, technically correct and yet succinct. Julian does not limit himself to marriages and divorces. For example, he examines the tax challenges faced by cohabiting individuals. He considers whether an unmarried woman can deduct the cost of contraception, and whether the cost of gender reassignment surgery is a deductible medical expense. But as I tried to construct a revised title for Julian’s book, I found myself wallowing in painfully long captions, so I gave up! But don’t give up the chance to acquire this book.
From MAULED AGAIN
Julian Block Talks Tax with Married, Divorced, and Other Couples
To be precise, Julian Block isn’t so much talking with the married and divorce, but sharing explanations of pretty much every sort of issue couples will encounter, beginning with a set of questions and answers that he has constructed to put the issues into realistic contexts. He does all of this in “Julian Block’s Tax Tips for Marriage and Divorce.” The range of topics and the folksy way in which Julian defuses the anxiety that accompanies tax questions for most people are impressive. He tackles puzzlers such as joint returns, property settlements, dependency exemptions for children of divorced parents, taxation of social security benefits, withholding, and even the tax consequences of having an affair. It’s not surprising that Julian moves through these topics with clear explanations written for taxpayers rather than tax professionals.
The folksy style pops up early, when in the preliminary chapter, Julian replies to the question, “It pays for me to file jointly. But I don’t want to reveal my income to my wife. Suppose I have her sign a blank return and then fill in the figures?” with a quick, “Don’t bother.” He follows up with an explanation that the taxpayer’s wife would be able to get a copy of the return from the IRS. We’re not told why the taxpayer wants to hide his income, but perhaps Julian doesn’t know. He also deals with more mundane question, such as shifting from married filing separately status to joint returns, and vice versa, the prohibition against one spouse itemizing and the other claiming the standard deduction, the tax treatment of a surprise “additional alimony payment . . . not required by our divorce decree,” and deductions for contraception and gender change surgery. He also gets into the deductibility of payments to girlfriends hired to manage rental properties or to do office work for the taxpayer.
Part 1 focuses on filing status, and includes discussion of when status is determined, amending returns, the scope of joint liability on joint returns, and the advantages and disadvantages of filing separately. Julian alerts those immersed in wedding preparations that they ought not to ignore the tax issues. He explains the marriage penalty and the marriage bonus, and how the scheduling of weddings planned for near the turn of the year provides tax planning opportunities. He also explains the tax treatment of surviving spouses.
Part 2 deals with the tax consequences of divorce, which can bewilder couples who are going through personal upheavals and encountering an array of financial and property decisions. Among other topics, the tax treatment of the legal fees, the effect of invalid divorces, and the difference between the tax consequences of an annulment and a divorce, and the determination of which parent claims the dependency deduction for children get close attention. Part 2 concludes with a section as interesting as its title suggests, “Unearthing Hubby’s Hidden Assets.” It is a good introduction to forensic accounting, as it explains what sorts of information can be derived from the information appearing on a joint return.
Part 3 explores the tax consequences of home sales by married couples, divorcing couples, divorced couples, and unmarried couples. It concludes with a look at the tax consequences of leaving property in both names while one of the two live in the house.
Part 4 untangles the taxation of social security benefits. Julian explains the computation of modified adjusted gross income, and provides examples to help readers understand what is one of the more complicated elements of individual federal income taxation. Part 4 includes some planning advice with respect to the impact on the computation of taxable social security benefits of filing jointly or separately, and concludes with some reminders about the use of social security numbers in connection with tax returns.
Part 5 is titled “Oddball Situations,” a title that makes sense when one examines the subtitles within Part 5. What’s discussed in “Having an Affair Can Be Taxing” is obvious and well worth reading. Several of the cases, and most of the issues, have inhabited my basic federal tax course for many years, because they are, as I tell my students, simply too good to pass by. More than a few taxpayers will be interested in “Dependency Exemptions for Live-in Lovers,” for reasons that should be readily apparent.
The book concludes with two short segments. Part 6 examines changes in withholding that might be necessary when taxpayers marry or divorce. Part 7 discusses amending returns.
This is a book worth reading. Someone needing or wanting to make a small gift to a friend or relative who has announced an engagement or shared the unsettling news of a divorce should consider giving the person a copy of Julian’s book. It might not be a glamorous present, but it’s a useful one, and one for which the recipient will be appreciative.
From MAULED AGAIN
Tax and Relationships: A Book to Read and Give
Every once in a while something crosses my past through the tax thicket that not only gets my attention but motivates me to share it. This time, it’s a book by Julian Block. The book’s title says a lot, but it doesn’t say it all: “Julian Block’s Tax Tips for Marriage and Divorce.” It might sound like another box of tax gimmicks, but it’s not.
Julian Block is someone whose name should be recognized by those who read items about taxes in the New York Times, the Wall Street Journal, Business Week, Money, and the U.S. News and World Report, or who notice his nationally syndicated column, The Tax Advisor. And for those more interested in the visual, he shows up on a variety of television news programs. He has the usual list of credentials attached to folks who try to interpret tax law for the ordinary citizen. I’d say he’s a lot like me except I haven’t made it into all those publications and my television appearances have been slim in number. And Julian has another credential in the “I wonder what it was like category”: he was a special agent for the Internal Revenue Service. My students surely remember that early in the basic tax course, while describing the audit process, I tell them that if someone shows up and identifies himself as a special agent, stop, and get an attorney. Once upon a time, Julian was one of those folks whose arrival, or more precisely, whose introduction, would raise blood pressure and accelerate heartbeats. Next best thing to being a rock star, I suppose.
So along comes a book with chapter titles like this one: “Having An Affair Can Be Taxing” sound like one of my in-class quips that gets the students’ attention. Using the question and answer format, Julian shares the questions he wants clients to ask. Almost in time for Valentine’s Day is this one: “Does the IRS require a woman to pay taxes on engagement gifts if she breaks the engagement?” That’ll keep some of them reading! Julian explains why December weddings often are more expensive than if postponed into January, and it has little to do with the cost of the reception hall. The marriage penalty and marriage bonus, two topics to which my students pay especially close attention, do not go unexplored. I must complain, however, that the chapter, “Unearthing Hubby’s Hidden Assets” is too forgiving of the wives who are no less adept at hiding wealth. But the stories in it surely will prove to be better than any television reality show.
Because tax season is upon us, I’m mentioning the book sooner rather than later. The book is of interest, of course, to just about everyone over the age of 18. I suggest picking it up as a gift for that newly-engaged couple who probably forgot to add it to their registry of desired gifts.
One of the best aspects of books, almost from the time there were books, is their ability to educate people regarding various aspects of their lives. My friend Julian Block, one of the nation’s experts on all aspects of taxation, has written Julian Block’s Tax Tips for Marriage and Divorce. This year in particular, everyone whether single, married, living together, separated or divorced needs to know how to navigate the complex tax system. Using a question and answer format, the book provides easily understood and excellent advice to the many questions people have regarding all aspects of relationships, along with warnings about various situations such as those in which a woman receives gifts from someone courting or just keeping them. In the case of divorce, the book discusses how still-married or ex-spouses can use information on a joint return to track down hidden assets. Recovering overdue alimony payments or child support is also addressed. A former IRS special agent, an attorney, and author of several books, Block’s new book is the place to start for anyone in a relationship who needs to know their way around how taxes will impact it.