I am a divorce lawyer in the Rochester area of Oakland County, Michigan. My office is easily accessible to Clarkston, Troy, Birmingham, Lake Orion, Bloomfield, Beverly Hills and Oxford. When a couple is divorced before the end of the year, IRS rules prohibit them from filing a joint tax return for that year. When a couple is not divorced by the end of the year or if they have not filed tax returns for a year preceding the divorce, the couple may file joint or separate tax returns.
Does the divorce court have the authority to compel the parties to a divorce to sign joint tax returns in Michigan?
According to Butler v Simmons-Butler, COA No. 321445, November 18, 2014 (For Publication), the answer is yes. This is a published opinion which means that it is the law of the land unless the Michigan Supreme Court overturns this decision. There was no clear court decision before this case as to whether a court in this State had the power to order the parties to file joint tax returns. Now it is clear that the court does have this power, however, it must make specific findings of fact before it may compel the spouses to do so.
This case involved a bitter divorce in a marriage which the court opened its opinion by stating “It is an understatement to say that this marriage went downhill quickly.” The couple met through an internet based dating company and about one year into the marriage, both of them allegedly engaged in domestic violence. They reconciled but then the wife took the children without the husband's knowledge and he immediately filed for divorce. During the divorce there were several motions and the court twice temporarily changed custody of the children with the wife being incarcerated for refusing to return the children to the husband after the court ordered the return.
Despite all of the above, the Court of Appeals spent the most time analyzing the court's decision to require the parties to file amended joint tax returns for the years 2011 and 2012. The court very basically ordered the parties file the amended tax returns and share in any liability or refund resulting from the same and ordered the wife to cooperate in the filing of the tax returns. She appealed under the claim that the trial court lacked the authority to order her to file amended returns and she should not be compelled to sign the joint returns under penalty of perjury because she would be affirming that the facts the husband states on the returns were true.
The appellate court found that when granting a divorce, the trial court has more discretion to fashion relief than it does on any other case, particularly when addressing the division of property. It then analyzed the manner in which some other states have found that the court may do this and other states where it has been decided that the court may not do this. The Michigan Court of Appeals decided that based upon previous case law and the Michigan system that the court has the power to do this under certain circumstances.
It ultimately decided that the court may compel a party to sign a joint tax return where: the parties do not have sufficient assets available for the court to shift in order to make up the difference in tax liability, where there is no history of tax problems with the other spouse, where the parties have a history of filing joint tax returns during the marriage and where the parties agree or the court orders that the reluctant spouse will be indemnified and held harmless by the other spouse for any tax liability.
I am frankly not surprised by this decision. I have been involved in cases where the judge has ordered the parties to file joint tax returns, but neither party filed an appeal regarding the issue. This has been a practice of the divorce courts in Michigan for some time but now it is officially within the power of the court to do this.