Does it seem like your spouse is being evasive about how much money he earns? Is he claiming your marital net worth to be a lot lower now that you’re separating than he told you it was during happier times? Or is your gut just telling you that something is missing? If you’re going through divorce, and you’re worried your spouse may be hiding money, it’s worth doing a little investigating to find out.
If your suspicions are right, you’ll discover hidden assets to share. If not, you can set your mind at ease. Either way is a win.
Some women going through divorce decide to hire a forensic accountant. If you’re not sure what that is (and have images of the Law and Order “dun dun” sound when you think about it…) it’s an expert who specializes in examining the finances of an individual or business in a way that’s suitable for court. They can be a huge help in your divorce. But what if you can’t afford to hire someone, or don’t want to spend the money without knowing if it’s worth it?
When we first published this article,* we listed 3 (relatively) quick things you can do to be your own financial detective. We explained it wasn’t an exhaustive list, but a good place to start. Since then, women have shared their own stories of assets they did discover were being hidden, and how they found them.
Don’t worry, you don’t need a degree in accounting to do this. We’ll walk you through easy steps to take to review each of the documents below.
*Before you start, you’ll need copies of your spouse’s bank statements, year-end paystubs, and tax returns. We suggest reviewing 3 years’ worth of each. That will give you a broader picture than just the last year. If you don’t have these docs, you have a right to request them as part of your divorce case.
1. Review bank statement transfers in and out.
- What you’ll need: Copies of your spouse’s (both individual and joint) bank statements.
- What you’ll do: Look for money being transferred out of the account (listed as a debit) to another account you don’t recognize. If it’s a transfer to another account at the same bank, the transaction might say like “online transfer to ########.” If it’s a transfer to a different bank, you’ll see something like “electronic debit Schwab ######.” If you don’t recognize what you see, you know you’ll want to look further.
Don’t just look at money leaving the account. It’s important to know where money is coming into the account from also. The entry will be similar, but it will be a credit instead of a debit. Sometimes deposits show up as from an “unknown” source.”
Banks have more information than shows up on your statement. So if you can’t figure out where a deposit or transfer is coming from, the next step is to ask the bank.
2. Check out his total compensation - what he received and what he might have held back.
- What you’ll need: A copy of his year-end paystubs.
- What you’ll do: You’re looking for a) current income that you didn’t know about (like a bonus) and b) compensation and benefits that were earned but haven’t been paid out yet (deferred comp).
Not every paystub received during the year will list bonuses; that’s why the year-end paystub is so important. It should show the total of all bonuses that were paid out that year.
A year-end paystub will also let you know if your spouse is participating in a deferred compensation plan - meaning some of his income wasn’t paid but is being deferred to a later date. It won’t show up on a tax return until it's received, so you might not even know about it. Even if it’s not counted as income now for purposes of alimony and child support, deferred comp is still an asset that can have a ton of value.
3. Look at your spouse’s tax return 1040, Schedules B and D.
- What you’ll need: A copy of the full income tax returns (whether it’s a jointly filed return or your spouse’s separate return), including any attached schedules.
- What you’ll do: You’re looking for 2 things: 1) interest and dividend income and 2) capital gains and losses. Both will let you know if your spouse has stock and bonds or other investments you aren’t yet aware of. Here’s a simplified way to check:
Each will appear on the 1040 (the first 2 pages of the tax return), so start there. Interest income is reported on line 8a or 8b. Dividends go on line 9a or 9b. If the total is $1,500 or less, that’s probably all you’ll find on the return. But if your spouse had more than $1,500 in interest and dividend income for the year, it has to be listed on Schedule B. There you’ll see a list of all the stocks and bonds that paid dividends and interest, and the amount received from each investment that year. So if you don’t even know if your spouse owns stocks and bonds, this is where you’ll find out!
Next, check line 13 of the 1040 for capital gains or losses. If there are any, you’ll also find a Schedule D attached to the return. That’s the place to report gains or losses from the sale of investments. Again, each investment has to be listed by name and amount received or lost.
4. Check for contributions to a health savings account.
- What you’ll need: Those same tax returns you looked at for #3 above.
- What you’ll do: First, let’s talk about what they are. Health savings accounts (HSAs) are tax-deductible savings plans that allow you to put aside pre-tax dollars for future health care expenses. It’s called a “savings account” for a reason - unlike the “use it or lose it” flexible spending account, money in a HSA can accumulate from one year to the next, and the earnings in the account grow tax-free. Don’t be fooled by the “health” part into thinking this isn’t an asset. It truly is a personal savings account; it just has to be used for qualified healthcare expenses.
Because they’re tax deductible, HSA contributions are required to be listed on your tax return. This is done through a completed IRS Form 8889, which is attached to the return, and the contribution is then also listed on Schedule 1 of the return.
5. Search for contributions to retirement on Schedule 1.
- What you’ll need: Those valuable tax returns again. Ideally, you should also get copies of any returns filed after your separation but before your divorce is finalized.
- What you’ll do: There are several places where retirement contributions may show up on your spouse’s return. One of them is Schedule 1, which is where adjustments to income get reported. Essentially, line 15 allows self-employed individuals and small business owners to deduct the amount they paid into a self-employed SEP IRA, a SIMPLE IRA, or another qualified plan for retirement.
If line 15 of Schedule 1 is filled out, your next step is to ask where those contributions were made. It may be that the funds were contributed to a retirement account you already knew existed. Or it’s possible that your spouse opened a new retirement account since you separated.
If you’ve done this exercise and don’t understand what you’re seeing, or your review leads to more questions (like you find bank account transfers you can’t trace), it’s a good time to bring in your lawyer or accountant to take it a step further.
Friend, you have a right to understand your financial picture, and to receive a fair settlement in your divorce.
So don’t let this information scare you. Or at least use that fear to do the work you need to protect yourself! It just might mean a bigger settlement for you. Or at the very least, a better night’s sleep.
* This is an update of an article originally published June 16, 2020.
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