It’s that time of year again! With the New Year and the issuance of last year’s W-2’s from your employer it is time to have your tax returns filed and (hopefully) have the State and Federal government refund you any extra money you paid them last year. For many taxpayers this can amount to thousands of dollars each year which is often treated as a form of savings plan to be cashed in at tax time. Men going through a divorce at this time of year have to pay special attention to the details of filing their taxes. Decisions will need to be made about when to file, whether to file separately or joint with your wife, what deductions to take and how you will receive your refund.
IMPORTANT: Talk to your accountant!
While this article addresses general tax issues for men going through a divorce, we highly recommend that you consult with your CPA or another tax professional to go over your specific situation.
Put Your Wife on Notice
It is common for one spouse to file electronic tax returns for the family and in doing so will obtain a personal identification number (PIN) for their husband as his electronic signature. She’s essentially signing your name to the tax returns. This is frequently done without the husband’s review, let alone giving his consent. If this is your circumstance, you or your attorney needs to inform your wife in writing that she does not have your consent to sign your name and that you need to actually review and participate in the filing of the returns. You can then ensure that the returns are accurate and that the refund goes where you want it to go. A tax refund is a marital asset and needs to be either used for joint purposes as agreed by the parties or divided as a part of the property settlement. If the refund goes to her and is spent, those funds won’t be available. If you’ve put your wife on notice and she files anyway, you will be better positioned to have the judge punish her for her unilateral action or in some cases allow you to file for relief as an injured spouse with the Internal Revenue Service.
Decide if You Are Going to File Jointly or Separate
As soon as you’re able to notify your wife not to file without your participation you will need to decide whether to file either a joint or separate tax return. If you were still legally married as of December 31st of the tax year in question, you typically file either a joint return or as “married, but filing separate.”
In many cases filing married but separate will result in a higher tax bracket which means from a tax liability standpoint it may be better to file jointly. Also, if you file separate in the midst of the divorce you will need to agree upon who is going to claim the children for the federal tax credit and state dependency exemptions. There would also need to be agreement on how to divide other tax deductions such as mortgage interest, real estate taxes, child care expenses, charitable donations, etc. If you file separate returns and both of you try and claim the same credits, exemptions or deductions, you’re almost guaranteed to have your tax return rejected or audited.
Even with these disadvantages to filing separately, sometimes you have no choice. Even if you wanted to, a divorce judge cannot force your wife to file jointly with you since taxes are a federal, not a state law issue. The most a judge can do is determine what the tax liability would be either way and order her to compensate you for what you lost by filing on her own.
Sometimes, you may be the one that doesn’t want to file jointly. You may want to ensure that you actually receive a tax refund, even if it is lower, and not depend on her cooperation in dividing a joint refund. Your wife may have under-withheld from her paychecks last year or paid no taxes at all on her income which could mean your refund will be soaked up by her unpaid taxes. She could also be self-employed and engaging in questionable accounting methods for which you no longer wish to be liable by filing a joint fraudulent tax return.
You May Need to have the Court Intervene
If the potential tax refund is substantial and your wife is not cooperating, you may need to have your lawyer request a hearing on the issue. A judge can issue a restraining order preventing your wife from unilaterally filing a joint tax return or from diverting the tax refund for her own purposes. The court can also order that the refund be issued in check form rather than direct deposit which would require both parties’ signatures. The court could even order that the refund be deposited into an escrow account so that the funds stay put until they can be divided with the rest of the property settlement. If your wife’s unilateral actions have caused you to have a higher tax liability than you otherwise would have, you need to be compensated
Start Thinking About Next Year’s Taxes
Beyond the issues for the current tax year, you and your lawyer will need to negotiate future tax issues in your settlement. These will include who will claim the children, who will take this year’s other tax deductions, who will be liable if any previously filed joint tax returns are audited, etc. You should also discuss with your accountant what your tax liability may look like for the current year so that you can make appropriate changes to your payroll deductions or estimated taxes to account for the fact that you will no longer be filing jointly. The last thing you want to deal with the first full year after your divorce is a big tax bill.
About ADAM (American Divorce Association for Men)
The American Divorce Association for Men (ADAM) is a group of highly qualified attorneys who have advocated for men’s rights in divorce, child custody and parenting time, paternity, support, property settlement, post-judgment modifications, and other family law matters for over 30 years. Since 1988, ADAM has been aggressive, diligent, and uncompromising when representing their clients. A team of passionate and skilled family law attorneys, ADAM is dedicated to being Michigan’s leading divorce attorneys for men