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Filing Joint Tax Returns Pending Divorce Litigation

A question that often arises is, “Should I file a joint tax return with my spouse if I am in the process of getting divorced?” The answer will depend on your circumstances. An accountant will be able to help you understand the financial consequences of filing a joint return or filing “married filing separately,” however a family law attorney can help you understand other consequences that may result to your case. For instance, in many cases, one spouse questions the true income of the other spouse. This frequently occurs in the context of those who are self-employed, and/or those whose income is not solely reported on a Form W-2. If you are making an argument in your matter that your soon to be ex-spouse is under-reporting his income, you should avoid filing a joint tax return, or you should execute what is known as an “indemnification.” Such an “indemnification” will indicate that you have no independent knowledge regarding your spouse’s income, but are executing the joint tax return based on your spouse’s representations. This is an indication that you have no independent knowledge regarding the truthfulness of your spouse’s income, which will help you preserve arguments you may have in your case relative to the under-reporting of income.

In rare circumstances, a family court can compel the parties in a divorce case to file joint tax returns, particularly if an indemnification has been executed. The courts must rely on the specific facts of each case to determine if the parties in a divorce proceeding should be compelled to file jointly. Bursztyn v. Burszytn, 379 N.J. Super. 385, 398 (App. Div. 2005). In Burszytn, the court considered the significant financial benefit to filing joint returns and determined that filing separately would unnecessarily deplete funds available for support. The court also considered that all of the family income was earned by the husband, and there was no allegation or indication by the wife or other that any prior returns were filed fraudulently. The court took notice that the taxes were prepared by an independent expert and that the husband had indemnified the wife with respect to the returns. Lastly, the court determined that the majority of the marital assets were required to pay marital debts, so there was almost no means for the court to order relief through equitable distribution for the financial consequences of separate tax returns. However, the court noted that there are less intrusive means to remedying any financial consequences to filing separate tax returns by altering the equitable distribution of property. In some cases, based on the specific facts, this would be the more appropriate relief.

The Appellate Division has specifically addressed the relief available to the trial courts if joint tax returns are not appropriate or if one party refuses to cooperate in a joint return. Equitable distribution should take into account any tax ramifications of the parties filing separately pursuant to court order or one party’s refusal to cooperate in filing joint returns. See Wadlow v. Wadlow, 200 N.J. Super. 372 (App. Div. 1985); Bursztyn, 379 N.J. Super. 385 citing Leftwich v. Leftwich, 442 A.2d 139 (D.C.App. 1982).