Software for Tax-Optimized Divorce Settlements create options that are better for everyone involved. Software helps simplify calculations.
By Rick Kabra, Technology Specialist
Calculating fair divorce settlements acceptable to both parties is challenging for a family law attorney, especially when considering tax optimization. When you take the time to consider the tax implications of a settlement, you create options that are better for everyone involved. Divorce legal software helps simplify the calculations, but is it better to choose a traditional desktop application or cloud-based software?
Why Optimize For Taxes?
Many divorcing couples, and even a few lawyers, don’t understand that the IRS views alimony and child support differently. Alimony is income and that means the recipient must claim it and pay taxes on it, while the payor can take the payments as a deduction. Child support, on the other hand, is not income, is not taxable, and is not deductible. This simple difference can have profound effects on a divorce settlement.
Attorneys can trade-off alimony and child support dollar for dollar to minimize the tax impact. The same number of dollars change hands but fewer dollars go to the government. The calculations can be complicated, especially when considering other deductions and Alternate Minimum Tax, which is why attorneys use family lawyer software to help them find the ideal settlement. However, what kind of software is best: desktop or cloud-based?
Using Desktop software for Tax-Optimized Divorce Settlements
Many family law practices use software that installs onto their local computers. This can be a great choice for attorneys who practice in areas with poor internet connections. Some attorneys are leery about trusting confidential client information to the cloud, despite assurances of how safe a well-secured cloud server can be. Unfortunately, that means they also have to deal with technical problems and limited flexibility.
Desktop software can be installed onto a laptop to give the attorney the mobility to calculate settlements when in court, at a mediation meeting or in other situations outside of the office. Many desktop solutions also offer a mobile app. These apps give the attorney settlement tools such as alimony buyout or pension valuation calculators that can be used from a smartphone when away from the desktop software.
Innovative Cloud Software
In the last few years, attorneys have been given the opportunity to use a new type of technology: the cloud. Cloud-based divorce software can be used from anywhere with an internet connection, and from any device including Windows or Mac computers, tablets or smartphones. Attorneys don’t have to worry about technical issues since the software is maintained at professionally-managed data centers.
Despite growing concerns over cloud security, studies have shown that cloud applications are actually safer than desktop solutions. The servers are protected by a level of digital and physical security that would be unaffordable by a typical law firm. Automatic backups and security patches ensure the information is protected. News stories about cloud data breaches are almost always due to focused attacks on specific users with weak passwords rather than an overall failure of the cloud security system.
Whether you prefer cloud or desktop, the importance of tax optimization tools in family attorney software cannot be overstressed. Use the right tools to prepare faster, fairer and more accurate settlements for your clients.
The CEO of CosmoLex, Dr. Rick Kabra has years of experience in the legal software industry, catering to the specialized technology needs of small to mid-sized law firms. CosmoLex is a cloud-based legal billing and trust accounting system specifically designed for solo and small law firms. www.cosmolex.com
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