CAN THE FAMILY COURT MAKE DIVORCING PARTIES FILE A JOINT TAX RETURN?
The short answer is yes. Under NRS 125.150 the court has the authority to make an equitable disposition of the community property of the parties. When making an equitable distribution of the parties’ community property, the trial court must consider the tax consequences of the property division. In doing so, the court should consider the benefit each party receives from the yearly marital income, as well as the tax liability the income creates. When dividing community property, “trial courts must consider tax consequences when, as in the case at hand, there is proof of an immediate and specific tax liability.” Ford v. Ford, 105 Nev. 672, 677, 782 P.2d 1304, 1308 (1989). The court, therefore, likely has the discretion to compel parties to file joint income tax returns when equitable.
While there are no cases on point in Nevada, other jurisdictions are split on the issue. The majority of states, however, derive the court’s authority to compel parties to file income tax returns jointly from the court’s discretion to consider tax issues when equitably distributing marital property. Bursztyn v. Bursztyn, 379 N.J. Super. 385, 395, 879 A.2d 129,135 (N.J. Super. App. Div. 2005). These states include Alaska, Arkansas, Colorado, Kentucky, Minnesota, Mississippi, New Hampshire, New Jersey, North Dakota, and Ohio. Those states that deny the court has the authority to compel the parties to file joint income tax returns base their reasoning on the individual’s right to file either jointly or separately under the Internal Revenue Code. Despite this federal statutory right, most courts believe that the right may be abridged by state courts. Trial courts must be cautioned, however, when deciding to compel parties to execute joint tax returns because of the “potential liability to which the parties would be exposed, and because there generally exists a means by which to compensate the parties for the adverse tax consequences of filing separately.” Id. at 398, 879 A.2d at 137. When there is a significant financial benefit to filing the tax returns jointly, the court has an obligation to consider the tax implications of its decision. Id. As a result, the court should have the discretion to compel the parties to file joint tax returns.
This blog is provided by the Las Vegas family law attorneys at Pecos Law Group.