Filing a Joint Tax Return While Divorcing? Be Careful!

Filing a Joint Tax Return While Divorcing? Be Careful! by Joshua Katz

{3:40 minutes to read} Married couples usually elect to file joint tax returns to maximize exemptions and deductions. When couples are divorcing but are still legally married, they remain entitled to the same advantages by continuing to file jointly, and may be tempted to do so. In fact, an unreasonable refusal to file jointly could be considered wasteful dissipation!

However, it is important to understand the implications of the content on the tax return — a sworn federal document — as it relates to subsequent determinations made by the court throughout the divorce.

When divorce proceedings begin, the court will calculate interim child and spousal support by utilizing the parties’ income. Often, income is determined (at least initially) based upon what the parties declare in their tax returns.

For example, a couple may file a return that indicates that the wife — self-employed, breadwinner in the family — earns $30,000 a year;  yet, the couple pays a monthly mortgage of $5,000 and drive a BMW and Tesla. Clearly, the joint tax return might not be 100% accurate.

In this hypothetical situation, the court is faced with a dilemma when the husband requests support from his wife. Eventually, the truth about the couple’s true income is revealed. In a hearing, the husband claims to be a stay-at-home house-husband and proves his wife earns in excess of $200,000, although they don’t report all of her income because it comes in as cash.

Ostensibly, there are two significant problems:

  1. The husband signed and swore to the reported income amount; and
  2. The judge — an employee of New York State — may have an obligation to report tax fraud to the state.

Regardless of these issues, it is clear from recent case law that the court is not bound by the tax returns. It is the job of the lesser monied spouse’s attorney to prove the additional income, either by a lifestyle analysis, bank records, or another suitable method.

As such, it is imperative that the lesser monied spouse understands that an initial support obligation is rarely modified until the trial concludes and the divorce is finalized.

It is possible, even at the outset of the case, for the court to impute additional income to the monied spouse for purposes of calculating temporary support obligations. However, it is still prudent for the lesser monied spouse to be wary of signing a joint tax return while the divorce is pending. This is true regardless of how much this spouse actually knows about the monied spouse’s true income, particularly when the monied spouse is self-employed or has undocumented cash income.

If you and your spouse are preparing to divorce, we are available to answer your specific questions and address any concerns.

Note: It is important to speak directly to your accountant about your specific circumstances. Plaine and Katz is not authorized to provide tax advice.

Plaine & Katz, LLP
80-02 Kew Gardens Rd.
Suite # 1050
Kew Gardens, NY 11415

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