More often than not, a matrimonial law attorney is not a C.P.A. More often than not during the process of a case, a client will ask the advice of their attorney, “How should I/we file tax returns this year?”
The answer is and should be first and foremost a reference to a C.P.A. A qualified C.P.A will be able to look at a divorcing couple’s entire financial picture, including their past and advise as to how to best file the final tax return in a way to minimize the taxes due.
What happens when one party does not want to file a joint return because of concerns regarding tax liabilities or even worse, penalties? The recent unpublished Appellate Division decision of Hreha-Coloccia v. Coloccia, A-3892-07T1, decided September 2, 2009, gives some guidance in this regard.
In a twenty year marriage where the parties had incurred tax penalties for husband’s income indiscretions related to his delivery business and separately for his failure to report an IRA withdrawal, the Court held that the wife would not be forced to file joint tax returns with the husband where she had already filed.
The Court held that compelling the wife to file joint tax returns is plain error. Given the husband’s history of underestimating his income and the fact that the wife had already filed returns on her own, it would be inequitable to force the wife to risk exposure to another tax liability because of the husband’s failure to pay.
Each case is fact specific which is why seeking the advice of a qualified accountant can be so helpful. There are times when filing that one last return as ‘married’ is most logical. For some tips for a recently divorced taxpayer, check the IRS website here.
EDITOR’S NOTE: THE CASES APPEAR TO BE ALL OVER THE MAP ON THIS ISSUE. THE WADLOW CASE, WHICH IS AN OLDER APPELLATE DIVISION CASE, SAYS THAT YOU CANNOT COMPEL THE FILING OF A JOINT RETURN, IN PART GIVEN THE POTENTIAL CIVIL AND CRIMINAL RAMIFICATIONS ABOUT FILING TAX RETURNS. THAT SAID, THE COURT HELD THAT THE EXTRA TAX CAUSED BY THE FILING OF A JOINT RETURN COULD BE CONSIDERED IN EQUITABLE DISTRIBUTION. ON THE OTHER HAND, IN THE LAST SEVERAL YEAR, THE BURSZSTYN CASE SAID THAT PARTIES COULD BE COMPELLED TO FILE JOINT RETURNS. THE QUESTION THAT ARISES HERE WAS WHETHER HOW LONG HAD THERE BEEN “UNDERESTIMATING” OF INCOME? HOW LONG HAD THE WIFE KNOWN ABOUT IT? WAS SHE REALLY AN INNOCENT SPOUSE, IF THAT REALLY EXISTS? IF THE MONKEY BUSINESS ON TAX RETURNS WAS A CONTINUING THING, WAS IT NOT PUNITIVE TO THE HUSBAND HERE TO INCUR THE ADDED TAXES WITHOUT CONSIDERATION? ERIC S. SOLOTOFF