In order to file a joint tax return, parties must be married on the last day of the year. Many times it makes sense to file a joint return, as it generally gives the most favorable tax treatment. However, this result follows only when parties trust each other. When parties don’t trust each other, it’s not a good idea.
One of the most frequently litigated tax disputes involves whether a tax return between spouses should be treated as a joint return or a separate return. The filing of a joint return imposes joint and several liability unless one spouse qualifies as an innocent spouse. The general rule is that both spouses must elect to file jointly. It is commonly considered that both spouses have elected to file jointly when a return is signed by each spouse. However, the failure of one spouse to sign does not preclude the finding that a joint return has been filed.
It is important for the family law practitioner to address how divorcing spouses will file when finalizing the divorce. In addition, spouses should be mindful that filing a joint return is a double-edged sword. While some tax may be saved, the non-income producing spouse is subjecting his or her separate assets (even non-marital assets) to possible adverse collection procedures by IRS in the event that tax due on the joint return is not paid or a later audit produces a deficiency.
Relying on the innocent spouse escape hatch can be an expensive mistake. Be cautious and do not sign a joint return without having the matter reviewed by a divorce and tax attorney who will know how to protect you. To prevent the possibility of being found to have filed a joint return, an unwilling spouse should file a married filing separately return as early as possible. Filing a separate return before the other spouse files a joint return is usually conclusive evidence that the non-signing spouse did not intend to file jointly.1
1 This blog contains an abridged article from: Steinberg, Robert. “Joint Return vs. Separate Return: The Importance of Avoiding Tax Headaches for Divorcing Spouses.” The Family Law Commentator. Winter 2018. Retrieved from: http://familylawfla.org/wp-content/uploads/2018/03/Fam-2018-Winter-Edition-FINAL2-1.pdf