Introduction
In high-conflict or high-asset Florida divorces, accurate financial disclosure is critical. Whether the dispute centers on alimony, child support, or equitable distribution, the entire process relies on both parties providing a clear and complete picture of their finances. Unfortunately, that’s not always what happens. Some spouses try to conceal income, underreport earnings, or obscure financial accounts to gain an unfair advantage during settlement or litigation.
Tax returns, when carefully examined, are one of the most powerful tools available to uncover discrepancies. They provide a detailed account of reported income, deductions, credits, and account activity that can reveal inconsistencies between what a spouse claims and what they actually earn or hold. Reviewing tax returns is a necessary part of discovery, but doing it properly requires experience, attention to detail, and a working knowledge of how income is often hidden.
A knowledgeable Tampa divorce lawyer knows where to look and what red flags to identify. This article offers a comprehensive guide on how to review tax returns to detect hidden income or accounts during a Florida divorce, what specific lines to examine, and how to interpret the patterns that may indicate deception.
Why Tax Returns Matter in Divorce
Tax returns are a sworn statement submitted to the Internal Revenue Service under penalty of perjury. They contain information about income, investments, interest, business ownership, foreign accounts, real estate holdings, and more. Unlike financial affidavits, which may be incomplete or self-serving, tax returns are usually more reliable because they must meet federal reporting standards.
Tax returns can reveal:
- Undisclosed sources of income
- Hidden business activity
- Foreign or joint accounts
- Deferred compensation
- Investment or passive income
- Overstated deductions or losses
- Evidence of self-employment manipulation
A Tampa divorce lawyer experienced in complex financial cases will always obtain and closely scrutinize at least three years of federal tax returns from both parties. For higher-income or self-employed individuals, five years is standard.
Which Tax Documents Should Be Requested?
To perform a thorough review, the following documents should be requested through discovery or subpoena:
- Form 1040 – Individual Income Tax Return (with all schedules)
- W-2 Forms – Wage and salary income from employers
- 1099 Forms – Non-employee compensation, investment income, interest, or dividends
- Schedule C – Profit or loss from a sole proprietorship
- Schedule E – Supplemental income or loss (rental property, partnerships, S corporations)
- Schedule B – Interest and dividend income
- Schedule D – Capital gains and losses
- K-1 Statements – Income from partnerships, S corporations, or trusts
- Business tax returns – For corporations (Form 1120), S corporations (Form 1120S), or partnerships (Form 1065)
A Tampa divorce lawyer will ensure that all relevant years and all attachments are produced, not just the basic Form 1040.
Red Flags in Form 1040
The Form 1040 provides a snapshot of a taxpayer’s overall income picture. Several areas may indicate discrepancies or suggest that additional investigation is needed:
- Line 1 – Wages, Salaries, Tips
Compare this figure to W-2s. If the spouse claims they’re unemployed or underemployed, a high W-2 figure tells a different story. Look for multiple W-2s, which may indicate other employment not disclosed. - Line 2 – Taxable Interest
Taxable interest income may signal hidden savings or investment accounts. Cross-reference with Schedule B to determine the institutions and amounts. - Line 3 – Dividends
Regular dividend income indicates significant investments. If dividend income appears but no accounts are listed in disclosures, assets may be hidden. - Line 7 – Capital Gains
Income from stock or real estate sales should appear here. Review Schedule D to identify the source, timing, and net proceeds. - Line 8 – Other Income
This line may include gambling winnings, jury duty pay, canceled debts, or any income not categorized elsewhere. It may also mask underreported cash income. - Line 9 – Total Income
This figure is critical when analyzing lifestyle versus claimed income. If the total income appears low but the lifestyle includes luxury vehicles or vacations, hidden income may exist.
A Tampa divorce lawyer may also look at the consistency of income reporting over several years to detect patterns or anomalies.
Schedule B: Interest and Dividends
Schedule B provides a detailed breakdown of interest and dividend income. Look for:
- Accounts in unexpected institutions
- Significant increases in reported income
- Foreign accounts (reported in Part III)
- Joint accounts with others, especially family or business associates
Taxpayers must report any interest-generating accounts, even those not in their primary name, if they are the beneficial owner. This includes brokerage accounts, savings accounts, CDs, or trust accounts.
A Tampa divorce lawyer can issue subpoenas to the listed institutions if the account has not been disclosed through formal discovery.
Schedule C: Self-Employment Income
For business owners and sole proprietors, Schedule C is where profit and loss from a business is reported. It’s also one of the most manipulated parts of a tax return.
Red flags include:
- High gross receipts with low net profit
- Excessive deductions for travel, meals, or vehicle expenses
- Depreciation claims without corresponding asset disclosures
- “Other expenses” that appear vague or undocumented
- A net loss used to offset other income sources
A Tampa divorce lawyer will often retain a forensic accountant to evaluate whether deductions are legitimate or artificially inflated to suppress income.
Schedule E: Rental and Pass-Through Income
Schedule E lists income from:
- Rental properties
- Partnerships
- S corporations
- Trusts
- Real estate investment trusts (REITs)
In divorce cases, this schedule can reveal:
- Properties not disclosed elsewhere
- Business interests that produce income
- Partnerships that funnel income or hold assets
- Losses that may be manipulated to reduce visible income
This schedule also includes depreciation and other write-offs that lower taxable income but do not represent a loss of cash flow. A Tampa divorce lawyer will analyze the distinction between paper loss and actual economic income.
K-1 Statements
K-1s are tax forms issued to partners and shareholders in pass-through entities like partnerships and S corporations. These forms detail each partner’s share of the business income, deductions, credits, and distributions.
Key areas to review:
- Ordinary business income (Box 1)
- Net rental income (Box 2)
- Interest, dividends, or capital gains (Boxes 5-9)
- Distributions (Box 19)
Distributions can be significant, and if they don’t match bank account deposits or financial disclosures, the spouse may be hiding or diverting funds.
A Tampa divorce lawyer will obtain K-1s from all relevant entities and compare them to Schedule E and the partner’s bank account records.
Foreign Accounts and Form 8938
Taxpayers with foreign accounts exceeding certain thresholds must file Form 8938 (Statement of Specified Foreign Financial Assets) along with their tax return. This form includes:
- Bank accounts held overseas
- Foreign securities or investment accounts
- Ownership in foreign entities
Failure to report these assets can result in IRS penalties, but many individuals still omit them, especially in divorce contexts.
A Tampa divorce lawyer will request Form 8938 and related disclosures, particularly when the spouse has ties to foreign countries or travels frequently for work or investment purposes.
Uncovering Hidden Accounts Through 1099s
Various types of 1099s reveal income from sources other than employment:
- 1099-INT: Interest income
- 1099-DIV: Dividends
- 1099-B: Brokerage sales
- 1099-MISC: Business or self-employment income
- 1099-NEC: Nonemployee compensation
- 1099-G: Government payments (unemployment, tax refunds)
- 1099-R: Retirement account withdrawals
Each form lists the issuing institution. If the institution does not appear in the financial affidavit, it may be a clue that additional accounts exist.
A Tampa divorce lawyer can use these forms to trace funds and compel full asset disclosure.
Common Techniques Used to Conceal Income
Spouses attempting to hide income may use a variety of tactics:
- Cash-Based Businesses
Restaurants, construction, or consulting businesses often underreport cash receipts. Compare gross receipts with known customer volumes. - Overstated Expenses
Inflating business expenses to reduce net income on Schedule C or E. - Paying “Ghost Employees”
Adding non-existent employees to payroll and diverting those funds for personal use. - Delaying Income Recognition
Postponing receipt of income until after the divorce is finalized. - Creating Phantom Debt
Claiming fake loans to reduce net worth.
A Tampa divorce lawyer working with a forensic accountant can investigate and rebut these tactics in court.
Lifestyle Analysis as a Supplement to Tax Review
Sometimes the best evidence of hidden income comes from a lifestyle analysis. If a spouse claims to earn $80,000 per year but lives in a $1.5 million home, drives a $100,000 vehicle, and takes three vacations a year, the tax return doesn’t tell the whole story.
Tax returns must be analyzed in conjunction with:
- Credit card statements
- Bank account records
- Real estate documents
- Loan applications
- Social media posts
A Tampa divorce lawyer will use these tools to present a full picture of the spouse’s financial situation—regardless of what the tax returns show.
Legal Remedies for Hidden Income in Divorce
If a spouse is found to have concealed income or underreported earnings, the court may:
- Reopen equitable distribution
- Impute income for alimony and child support calculations
- Award attorney’s fees to the wronged party
- Hold the dishonest spouse in contempt
Judges have wide discretion to remedy fraud and misrepresentation. A Tampa divorce lawyer will request financial sanctions or inequitable distribution adjustments where appropriate.
Timing Considerations
Florida courts consider both the date of separation and the date of filing when analyzing income for support and property division. Reviewing several years of tax returns provides context and highlights trends in income fluctuation.
For example, if income mysteriously drops in the year leading up to divorce, but prior years show consistent earnings, the court may conclude the drop was strategic.
A Tampa divorce lawyer will examine five years of tax data when possible and highlight sudden shifts in income.
Tips for Tampa Divorce Lawyers Handling Tax Return Review
- Always Obtain Full Returns
Partial returns are useless. Get all schedules and supporting documents. - Cross-Check with Financial Affidavits
Compare disclosures with returns to spot discrepancies. - Use Experts When Necessary
Forensic accountants, valuation experts, and tax professionals can interpret complex returns. - Focus on Cash Flow, Not Just Taxable Income
Real wealth often hides in depreciation, business write-offs, and distributions. - Track Return Preparers
The CPA listed on the return can be deposed to explain numbers and reconcile records.
FAQ: Reviewing Tax Returns to Find Hidden Income or Accounts
Can tax returns show hidden bank accounts?
Yes. Schedule B and 1099s may list interest-bearing accounts or financial institutions not disclosed elsewhere.
What if the tax return shows low income, but lifestyle says otherwise?
This discrepancy can support a claim of imputed income or fraud. Courts can adjust support accordingly.
How many years of tax returns should I review in divorce?
At least three years, preferably five—especially for self-employed spouses.
What is Schedule C used for?
To report income and expenses from a sole proprietorship. It’s often manipulated to understate income.
Can we subpoena a CPA for more information?
Yes. If the CPA prepared returns or has relevant financial documents, they can be subpoenaed or deposed.
Can a spouse be penalized for hiding income on taxes?
Yes. Courts may award a disproportionate share of assets or impose financial sanctions.
Do tax returns show offshore accounts?
Yes, if properly reported. Look at Form 8938 and Part III of Schedule B.
Is cash income usually reported on tax returns?
Not always. That’s why lifestyle audits and other records are necessary to detect unreported earnings.
Can I use 1099s to find investment income?
Yes. 1099-DIV, 1099-B, and 1099-INT reveal investment and brokerage account activity.
Should I always hire a forensic accountant?
Not always, but for complex or high-asset cases, it can be invaluable for finding hidden income or assets.
A detailed review of tax returns is one of the most effective ways to uncover hidden income or accounts in a Florida divorce. But these documents must be read carefully and in context. A Tampa divorce lawyer with experience in financial discovery can identify red flags, cross-reference inconsistencies, and pursue legal remedies when a spouse is dishonest. With the right strategy, what’s hidden in the numbers can be brought to light—and used to achieve a fair and informed outcome.
The McKinney Law Group: Divorce Counsel for a Stronger Future in Tampa
At The McKinney Law Group, we believe every divorce should be handled with a clear focus on long-term results. Our Tampa-based legal team works with clients to craft strong, forward-thinking solutions during one of life’s most challenging transitions.
We help with:
✔ Navigating all stages of the divorce process
✔ Protecting your rights as a parent and financial partner
✔ Resolving complex property division issues
✔ Crafting custody arrangements that reflect your family’s needs
✔ Adjusting existing court orders when life changes
To schedule a consultation, contact us at 813-428-3400 or email [email protected].