The Perils of Joint Tax Returns for Divorcing Couples

ThinkstockPhotos-91459982

Many married couples file joint tax returns because they offer particular advantages, such as lowering the high-earner’s tax bracket, getting a higher income ceiling for Roth IRA contributions, and access to various tax credits and deductions. However, once you decide you’re going to divorce, there are significant issues you must consider before agreeing to file jointly.

Joint and several liability is a major issue. This means that while both spouses are responsible for the veracity of the return, each spouse who signs the return can be held responsible for the total underpayment of any taxes, plus interest and penalties. So, if your spouse misreports income, the IRS can come after you for the total owed. There is an “innocent spouse” defense that signers can assert, but this is generally reserved for financially unsophisticated, dependent spouses. If you are a career professional, you’re going to have a hard time convincing the IRS you didn’t understand what you were signing.

So, do you have to forego the savings you get from signing a joint return? Not necessarily. You can have your spouse sign an indemnification agreement. With this agreement, your spouse promises to cover you for any additional tax obligations due to errors and omissions on your tax return. If your spouse is secure enough financially to make good on an offer of indemnification, you can go ahead and file jointly. However, if you have doubts about your spouse’s finances, business dealings, or job security, you have to question whether a promise to indemnify you will be any good.

If you are considering divorce, Solutions Divorce Mediation, Inc. can provide the efficient and cost-effective legal services you need. Call us at 1.631.683.8172 or contact our Long Island office online.

Post a Comment

Your email is never published nor shared. Required fields are marked *

*
*