Q. My husband and I separated in 2009 but we are not divorced yet. We are
on extension because he wanted me to sign a joint tax return with him,
but I am nervous about doing it and keep stalling. He says if I don't
sign he will ask the judge to make me. He has his own business and I suspect
he is not reporting all his income. Am I required to file jointly and
what happens if I do?
A. If you remain married as of December 31 of any year, you may - but you
not required to - file jointly with your husband. It does not matter that
you were separated during the tax year as long as your marital status
has not been terminated, for instance by a Bifurcation application. You
cannot be forced to file jointly, and no judge would order that you do
so. Married people who are considering not filing jointly, however, should
avoid signing the joint Form 4868 for the automatic extensions; depending
upon other circumstances, the IRS might deem this is a consent to a joint return.
The chief problem with filing joint tax returns is that each spouse is
"jointly and severally" liable for one hundred percent of any
taxes due on either and both parties' income, and interest and penalties
as well. If you suspect your husband is defrauding the IRS you are ill
advised to file with him. Another problem is that absent an agreement
otherwise, tax liabilities incurred between the date of marriage and the
date of separation are community property debts, regardless which of you
generated the income upon which the taxes are based. If it is not clear
that you do not intend to take on any share of the liability, particularly
the portion incurred after separation, by signing jointly an argument
can be made you should be responsible for one-half of the full-amount.
It is best to define your understanding in a writing signed and dated
by both of you.
If you do file jointly anyway, at a minimum consider first getting him
to sign an indemnification agreement; if there is a court proceeding pending
between you, this should be in the form of a Stipulation and Order that
is filed with the Court. You want a judge's signature on the agreement
because agreements have to be converted into orders or judgments anyway
to be later enforced if one party breaches their promises.
Indemnification agreements are only as good as the availability of a meaningful
remedy, and they apply only as between the parties and do not bind the
IRS or anyone else. Even if your husband promises to pay all the taxes,
interest, and penalties, and even if his promise becomes a court order,
as a practical matter if he later lacks the ability to meet his obligation
(or refuses to do so) you may wind up with a money judgment against him
that you cannot collect.
But there can be good reasons to file jointly, and it is much less a problem
where your spouse is trustworthy. Taxes are usually but not always lower,
and to the extent he paid you spousal support in 2009 if you file jointly
you will not be charged with that as taxable income; but nor will he get
to claim the spousal deduction.
The issue of joint returns is something divorcing couples often barter
over. You ought to have clear ideas of the pros and cons for you in your
particular situation. If you are reluctant to sign, consider what you
might trade for. It may be helpful to know how much money your spouse
stands to save if you agree to file jointly, so you can evaluate the value
to him of your cooperation.
I urge you to speak to a competent accountant or other tax specialist
early on, and before signing an extension request. Most attorneys have
a limited understanding of tax rules, and they will usually urge you to
consult an expert. You should follow that advice. Unless a lawyer is herself
a tax specialist, avoid relying just on an attorney's opinion. Besides,
an accountant can examine how you might end up under your other options.
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Thurman W. Arnold III