Divorce and Income Tax Returns

Divorce and Income Tax Returns

In the case of Butler v. Simmons-Butler, decided on 18 November 2014, the Michigan Court of Appeals held that the trial court can order a party to file a joint income tax return (original or amended) if such an order is in the best interests of the marital estate. In this case, the defendant was ordered to file two amended joint income tax returns with the plaintiff. The Court held that

it is within the broad discretion of a trial court to compel a party to sign a joint tax return when, under all the circumstances, it is in the best interests of the marital estate and . . . there is (1) no ability for the court to make up the difference in tax liability through an allocation of property, (2) there is no history of tax problems with the requesting spouse, (3) the parties have a history of filing joint tax returns during the marriage, and (4) the court orders the spouse (absent an agreement to do so) to indemnify and hold harmless the reluctant spouse for any resulting tax liability.

This issue has been dealt with by Michigan trial courts for many years, so this decision is both interesting and important because of the clear support it gives trial courts in making equitable divisions of the marital estate. Especially when children are involved at an exemption amount of $3950 per dependent, it is important to consider how the income tax return should be filed.

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