tax bagTexas marital property law is different than most other states because it is based on a scheme of community property. In dealing with filing of tax returns, this difference can cause a significant impact on divorcing spouses.

In community property states, each spouse, if filing separately, reports one half of the other spouse’s community income, but the tax liability on each return is still determined separately. Each spouse who files separately pays tax on one half of his or her spouse’s community income. Then, each spouse may have separately property income and deductions as well.

Because of this complicated scheme, some divorce courts may attempt to mandate that divorcing spouses file a joint return for the final complete years of the marriage. In doing so, divorce courts may only weigh the immediate financial gain to the marital estate instead of considering the future risks and liability of filing a joint return.  A spouse may rightly not wish to file jointly for reasons beyond the tax savings that a joint return may provide. Such reasons a spouse may provide to a judge to factor against filing a joint return may include:

  • Spouses share joint liability for the tax due on a joint return.
  • Nonmarital assets of each spouse may be subject to liability for the tax attributed to the income of the other spouse.
  • Obtaining relief from joint liability under the “innocent spouse” laws can be difficult to establish.
  • Indeminfication is an imperfect protection from joint liability because the IRS is not bound to pursue the indemnifying spouse and because collection efforts may be difficult to impossible.
  • A joint return is signed under penalty of perjury with felony consequences.
  • If a spouse has already been deceived in the relationship, distrust weighs against trusting the other spouse’s reporting on a tax return.
  • Questions of a tax preparer’s loyalty to one spouse or the other can create issues regarding filing a joint return.
  • For the spouse with little or no income, signing a joint return may pose considerable liability risk with no appreciable benefit.

Generally speaking, a Texas divorce court lacks jurisdiction to order how spouses will file their federal tax return. This is because a state court lacks jurisdiction to force behavior in the federal realm. Another method of addressing the financial impact on the marital estate from a spouse’s hesitation or refusal to file a joint return is to offset the financial impact in some other manner in the division of the community property.

Hat tip to Robert S. Steinberg and his article “When the Court Orders an Unwilling Spouse to File Jointly” from the Fall 2014 edition of ABA Family Law Section’s Family Advocate magazine.

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Photo of Michelle O'Neil Michelle O'Neil

Michelle May O’Neil has 27 years’ experience representing small business owners, professionals, and individuals in litigation related to family law matters such as divorce, child custody, and complex property division. Described by one lawyer as “a lethal combination of sweet-and-salty”, Ms. O’Neil exudes…

Michelle May O’Neil has 27 years’ experience representing small business owners, professionals, and individuals in litigation related to family law matters such as divorce, child custody, and complex property division. Described by one lawyer as “a lethal combination of sweet-and-salty”, Ms. O’Neil exudes genuine compassion for her client’s difficulties, yet she can be relentless when in pursuit of a client’s goals. One judge said of Ms. O’Neil, “She cannot be out-gunned, out-briefed, or out-lawyered!”

Family Law Specialist

Ms. O’Neil became a board-certified family law specialist by the Texas Board of Legal Specialization in 1997 and has maintained her certification since that time. While representing clients in litigation before the trial court is an important part of her practice, Ms. O’Neil also handles appellate matters in the trial court, courts of appeals and Texas Supreme Court. Lawyers frequently consult with Ms. O’Neil on their litigation cases about specialized legal issues requiring particularized attention both at the trial court and appellate levels. This gives her a unique perspective and depth of perception that benefits both her litigation and appellate clients.

Top Lawyers in Texas and America

Ms. O’Neil has been named to the list of Texas SuperLawyers for many years, 2011-2018, a peer-voted honor given to only about 5% of the lawyers in the state of Texas. In 2014-2018, Ms. O’Neil received the special honor of being named by Texas SuperLawyers as one of the Top 50 Women Lawyers in Texas, Top 100 Lawyers in Texas, and Top 100 Lawyers in DFW. She was named one of the Best Lawyers in America for 2016 and received an “A-V” peer review rating by Martindale-Hubbell Legal Directories for the highest quality legal ability and ethical standards.

Author and Speaker

A noted author, Ms. O’Neil released her second book Basics of Texas Divorce Law in November 2010, with a second edition released in 2013, and a third edition expected in 2015.  Her first book, All About Texas Law and Kids, was published in September 2009 by Texas Lawyer Press. In 2012, Ms. O’Neil co-authored the booklets What You Need To Know About Common Law Marriage In Texas and Social Study Evaluations.  The State Bar of Texas and other providers of continuing education for attorneys frequently enlist Ms. O’Neil to provide instruction to attorneys on topics of her expertise in the family law arena.