Personal identification numbers are provided to taxpayers who have discovered the hard way their tax return was already filed by someone else. This is considered a fraudulent activity. In these situations the IRS will issue what is commonly referred to as a PIN (personal identification number) to the taxpayer. The taxpayer is not required to utilize the PIN on the return. Yet, it is strongly suggested to avoid continued abuse.
In context to a divorce the PIN can become a sensitive issue? Why? When the IRS issues a PIN the IRS does not issue the PIN to a married couple. The PIN is issued to an individual. Yet, if the PIN is associated to a tax return that is married filing jointly who gets to use the PIN after the divorce is finalized or when a couple decides to file as married filing jointly?
As noted above the IRS assigns a PIN to an individual not a couple. If a couple is going through a divorce process the taxpayer who was not assigned a PIN may need to file for a PIN. Why is this a sensitive issue?
Let’s say the IRS provided Spouse 1 a PIN. Spouse 1 used that PIN on the tax return where Spouse 1 files married filing jointly. After the divorce is finalized Spouse 1 will still have the option to use the PIN. Yet, Spouse 2 cannot use that same PIN.
There is a special rule for divorcing parties who receive military benefits. Under this situation the government requires the taxpayers who receive the benefit to file a joint tax return for as long as they receive the benefit. As a result the couple cannot file separate tax returns during this period of time.
It is worthy to note the PIN is entered on Page 2 of the 1040. There is only one location to enter a single PIN. In other words there are not two locations to enter two PINs. Given the constraint of the form (Form 1040) once the couple finalizes their divorce the two taxpayers need two separate PINs.
Without appropriate documentation Spouse 2 may not be eligible to receive a PIN. As a result, in certain circumstances Spouse 2 may be exposed to someone else attempting to file Spouse 2’s tax return on Spouse 2’s behalf. It would be wise to file early each year and amend later if necessary to work through any outstanding issues that exist around the divorce.
About the Author
Larry Smith is a Founding Partner of Divorce Outcomes, a specialized professional services firm that manages all of the financial aspects in a divorce process. Since 2003 he has worked as a trusted financial advisor, financial advocate, divorce architect and technical financial expert; he is not an attorney. He is an alumni of KPMG and Andersen with expertise in technical accounting, forensics, sophisticated taxation, management consulting, risk management, advanced process engineering, business combinations, divorce management, multi-party negotiations, advanced quality analytics and cognitive performance technologies. Since 1986 Larry has been advising individuals and organizations about innovative financial solutions to resolve complex financial challenges that arise in life and in business.
For both personal and business divorces, Larry is considered an expert in divorce strategies, divorce process management, financial divorce architecture, financial risk management, taxation for divorces, financial divorce forensics, advanced divorce analytics, financial divorce negotiations and mediation, business valuations and sophisticated equity structures. He helps clients shape complex financial decisions, manage communication risks and ever-changing negotiating positions to strategically preserve or grow wealth from these types of transactions.
If You Have a Question
If you have a question, feel free to contact me at [email protected] or 617-680-5222. The call is free. I will spend 30–60 minutes with you. I will provide you an honest assessment as to where I think you are positioned in your divorce process or answer any questions you have. I may provide you some guidance, insight or advice that you can take with you as you wish. There is no obligation to move forward. The phone call is designed to ease your fears, provide you some options to pursue and a potential road to run on that can lead you down a path to achieve a successful outcome.
About Divorce Outcomes
Divorce Outcomes is a specialty services firm that helps people both domestically and internationally manage all of the financial decisions that arise in their divorce process. We are not attorneys. We are financial experts who partner with our clients as their personal financial advocates. We help our clients manage their divorce process, uncover hidden financial risks, architect divorce solutions, manage ever-changing negotiating positions, communicate complex financial matters and close the divorce process as soon as possible with a goal to arrive at the best outcomes possible. Throughout the process we evaluate the current state of our clients’ financial lives with an objective to best reposition their future. We do not sell any products. We simply raise issues that are in our clients best interest. Our clients share with us we:
- unfold, analyze and repackage their financial life so they are well positioned after their divorce
- preserve the value of their business or marital estate
- continuously strive to provide a return on our services
- build balanced financial solutions grounded in evidence
- find ways to make our client, and at times both parties, money through the process
- design their divorce to work for them and their family’s life
- provide mental clarity to make decisions
- reduce the total process time from start to close
- minimize the stress and unpleasant memories that can last a lifetime
As we reach an agreed upon settlement structure, we help our clients identify a fitting attorney who can leverage the financial solution to draft and record the requisite legal documents. Where outcomes are at risk from a traditional process, we function as expert financial negotiators or financial mediators to turn around the situation and achieve our client’s desired outcomes.
This communication is for general informational purposes only which may or may not reflect the most current developments. It is not intended to constitute formal advice or a recommended course of action as every person’s situation is unique and different. The information here is not intended to be, and should not be, relied upon by the recipient to make a decision without professional guidance.