Family Court Has Power to Order Joint Tax Return
In a recent case of first impression, the Michigan Court of Appeals ruled that the county family court, in this case St. Clair County, can compel a party to a divorce to sign a joint tax return. The case involved amended returns needed for tax years 2011 and 2012.
With no case law to guide its decision in accord with the principle of stare decisis, the Court of Appeals surveyed other states on the issue, focusing on a case from New Jersey that held a family court has the discretionary power to compel the execution of a joint tax return when it is in the best interests of the marital estate to do so. The appellate court cited the following criteria for when such discretionary power should be exercised:
- the difference in filing jointly and filing separately cannot be made-up through a property allocation;
- the spouse requesting execution of the joint return has no history of tax problems;
- the parties had a history of filing joint tax returns during the marriage; and
- the family court must order the spouse to indemnify and hold the reluctant spouse harmless on any tax liability resulting from the amended joint tax return.
In so ruling, the Court of Appeals recognized the broad discretionary powers that the county family courts have regarding the division of marital assets and the marital estate. This power, coupled with the fact that family court judges routinely issue injunctive orders compelling a party to take action or to refrain from taking action, can now go to the management of the family tax returns.
In divorce cases, the treatment of one or more tax returns is always something to consider by the lawyers and addressed in the judgment of divorce. With this recent ruling, tax preparers should now routinely be listed in the witness lists of the litigants.