If you are recently separated or divorced it is important to maintain good credit. If you allow your credit score to fall you may have difficulty buying or renting a home, obtaining insurance, buying or leasing a car, or finding a job. So, what can you do to maintain or improve your credit especially when you may feel overwhelmed financially?
Amy and Curtis Arnold, in their Huffington post article, How to Improve your Credit Score After Divorce, have the following suggestions:
Establish New Credit: Closing joint accounts and establishing accounts in your own name is a good step toward maintaining good credit. Initially, your credit score might go down because you have less credit available to you, but if you reestablish credit, that dip should be temporary.
Review your Credit Reports: You are entitled to a free credit report every 12 months from the three credit reporting companies, Equifax, Experian, and TransUnion. Go to annual credit report, to request all three. Once you have the reports, carefully review them and determine which accounts are held in your name and which you are a joint holder. Sometimes a spouse opens an account listing you as a joint or authorized user without your knowledge, which is why it is important to review your credit report.
Pay Bills on Time: If you are considering paying bills late, or worse, not paying at all, you should reconsider. This action could be extremely detrimental to your credit. One missed bill payment or a late mortgage payment could affect your ability to purchase a home and/or open accounts in your own name down the road. If you think you might be late with a payment, contact the lender or creditor, explain your situation, and ask for an extension. While there is no guarantee that they will agree, if they do, your credit will not be damaged, so long as you pay according to any new agreed upon terms.
Work with a Family Law Attorney: Mr. Arnold’s article recommends working with an attorney who focuses on family law. Having an attorney who you trust and who can advocate for you is important at this time when emotionally you may not be able to make rational or reasonable decisions. If you and your spouse are not able to agree on finances, a family law attorney, such as Geraldine Welikson Hess at Hess Family Law, can help you review your options and seek assistance from the Court when necessary.
Educate Yourself: If you were not the spouse in charge of finances, now is the time to educate yourself. Read articles, talk to a financial advisor, and gather information. Knowledge equals empowerment.
Be Wary of Retail Therapy: Divorce can be emotionally difficult. Oftentimes people turn to retail therapy to ease their pain. However, this could lead to significant debt and/or depleting savings. Before making a purchase, determine whether you really need the item. Ask yourself why you are buying the item and think about how it will affect you financially down the road. You may also benefit by talking with your attorney and/or a financial advisor about the pros and cons of spending vs. savings while you are going through the divorce process. Taking a moment to consider options often leads to better financial decisions.
April 15th, the day you must file your tax returns or request an extension, is fast approaching. If you and your spouse separated during 2015, you may be wondering how to file your taxes. If you were not divorced on or before December 31, 2015, the IRS considers you married for 2015, even if you lived separate and apart for the majority of the year. Therefore, you must either file a joint tax return together or you each can file your own married, filing separately tax return. If you entered into an Separation Agreement that addressed how tax returns would be filed then your Agreement will dictate how to file. Absent an Agreement that addresses tax filings, then you likely have a choice whether to file jointly or married filing separately.
For many families, filing a joint return will result in the most tax savings for the family as a whole. However when it comes to cash refunds and cash flow, there may be reasons why it benefits some spouses to file married filing separately. Thus, it is important that you first consult any Agreement you may have, and then consult with your accountant and/or family law attorney to review your options. If you decide to file separate returns, be aware that only one parent can claim head of household and/or dependency exemptions related to the children. Therefore if you do not already have an agreement with regard to these issues it is important to communicate with your spouse just prior to or shortly after filing to avoid you both claiming the exemptions. If both you and your spouse claim the dependency exemptions you may be more likely to be audited. If you both claim the exemptions it is likely that the spouse who filed their return first will get the benefit of the exemptions.
If you file married filing separately, you and your spouse can later on decide to amend to file a joint return. If you file a joint return, you cannot later amend to file married filing separately. But be aware that if on April 15th you file for an extension, rather than filing your actual return, the act of an extension may later prevent you from amending your married filing separately return to a joint return. Before filing for an extension you should consult with your accountant for advice regading any impact the extension will have on your ability to amend your filing later on.
Your tax returns provide us with information about your income and the source of income, income producing assets, and your investments, as well as whether you over or under withhold taxes from your paycheck. This information enables us to provide better advice in regard to division of assets and payment of support. Review of your tax returns is an integral part of your family law case; the attorneys at Hess Family Law ask that you provide us with your past tax returns. How many years of returns will depend on the issues in your case, but almost always we want at a minimum the past three years.
We can obtain copies of tax returns through the court discovery process if you do not have them. Other ways of obtaining copies of your tax return may include asking your tax preparer to provide copies, or obtaining copies from the IRS. To obtain a copy of your previously filed and processed tax return with all attachments, including Form W-2, you should complete Form 4506, Request for Copy of Tax Return, along with a $50.00 fee for each tax return requested. You have to allow 75 calendar days for the IRS to process your request. Tax Returns are generally available for returns filed for the current and past six years. On jointly filed tax returns, either spouse may request a copy and only one signature is required.
Oftentimes we don’t want to wait 75 days for the tax return to arrive, and/or it is cost prohibitive to pay $50 per tax return. The solution may be to order a Tax Return Transcript instead of the actual Tax Return using Form 4506-T. You can request your tax return transcript online directly from the IRS rather than making a request by mail. For a short time the IRS allowed individuals to obtain immediate transcripts of prior tax returns, by online download. However, due to security measures the ability to download a copy of your tax transcript has been suspected. It should take between 5 and 10 days to receive your tax transcript through the mail. Click here to learn how to obtain your tax transcript.