What Can Be Learned From Client Tax Returns

Reviewed, directed and approved by Kathryn M. Wayne-Spindler

It is no secret that a person can learn a lot from reading tax returns. Tax returns offer a lot of financial information which includes wages, interest, dividends from investment, brokerage, or savings accounts. A tax return also provides information as to if there were any distributions to an IRA. Retirement accounts, pensions, and annuities are sources of income and assets. A tax return also identifies if an individual is a sole proprietorship self-employment or if the individual has any type of rental income.

The most crucial tax schedules for a family lawyer to understand are Schedule 3, Schedule D, and Schedule E. Schedule 3 lists the estimated tax payments. A lawyer will need to understand this to be able to determine which bank account the payments came from, as they could have come from undisclosed accounts. Any overpayment the parties made in order to get a refund will be divided between the parties.

Schedule D provides the information on the sales of investments. This information will tell a lawyer to look for an investment account. A lawyer will also need to look for loss carryovers which are to be divided amongst parties. Any joint loss must also be shared between the parties, as the capital loss which may be used to offset future income.

Schedule E will provide the lawyer with any information regarding investment properties. This information includes the address, rental income, and rental expenses. On the back of Schedule E, there is a section that provides the listing of partnerships, S corporations, estate, and trust income, all of which is important information in a divorce case.

As for the information on a W-2, a W-2 provides information about non-taxable items, such as benefits, perks, deferment of income. Deferment of income can include retirement plan contributions or even deferred salary. This is a crucial document that needs to be reviewed in order for a lawyer to fully understand a party’s income.

For more information please see Family Lawyer Magazine Winter 2021.

The attorneys at Kathryn Wayne-Spindler & Associates are experienced attorneys who change with the times to meet the needs of their clients. Contact the Milford, Michigan law office of Kathryn Wayne-Spindler & Associates at 248-676-1000 for assistance. The attorneys of Kathryn Wayne-Spindler & Associates practice law throughout Southeastern Michigan including Oakland, Wayne, Washtenaw, Genesee and Livingston counties as well as four mid-Michigan counties Clare, Gladwin, Ogemaw and Roscommon. The attorneys handle cases in Milford; Highland; Hartland; White Lake; Wixom; Commerce; Walled Lake; Waterford; West Bloomfield; Linden; Fenton; Flint; Grand Blanc; Holly; South Lyon; New Hudson; Howell; Clare; Gladwin; Houghton Lake; Higgins Lake; and many more Michigan communities.