Every year starting in late February my office receives calls from divorcing clients either demanding that their spouse sign a joint tax return or refusing to sign a joint tax return and choosing to file married but separate status. The battle then begins.
The reasons for either position are usually either about maximizing the refund, minimizing any payment or sometimes just for spite. If the parties recognize it is solely about the money, then the answer will be readily determined after consulting with the couple’s accountant. If they self-prepare then extra care must be taken that the analysis is proper as there are many places where the conclusions may be inaccurate due to a lack of true tax understanding.
During the year one person may have paid in too much and the other may have underpaid, one person might not have paid or contributed to the children’s support or the mortgage or real estate taxes whether directly or indirectly. One person may have income from separate property, one person may be self-employed and not reporting all income or may be declaring expenses that are improper deductions.
The parties may disagree over the declaration of exemptions, mortgage interest, real estate tax payments, child tax credits, child care credits and as you can see the reasons for disagreement can be many.
However, if the parties accurately report their income and expenses in almost all cases an agreement can be made as to whether the parties will share and if so in what percentage the refund or payment arising from filing jointly. Even if one person does not allegedly report income/expenses properly an indemnification agreement can be signed holding one party solely responsible for future claims by the IRS that the return is inaccurate.
What should not happen is a refusal to file jointly for spite and to cause one person to pay more than what a fair accommodation would be between the two people. Afterall, if they were not divorcing neither would want to pay more in taxes.
Most judges will consider that a spiteful refusal may subject the spiteful person to a claim of “marital waste”. This means that the judge may make the person who refused a fair accommodation to pay the other spouse the money lost because of the vindictive decision.
So the first step should be to discuss and provide the family accountant with the tax documents and listen to the recommendation. Thereafter, the parties should consult their divorce attorneys. The goal should be to work this issue out as it is really just about the money.