It is one of the first questions that need to be addressed, often in an atmosphere of mistrust, hurt and hostility. Nonetheless, a decision must be made. Avoiding the issue will only make the government richer at the expense of the couple.

Ordinarily, joint returns produce a lower tax on the joint incomes of a husband and wife than filing separate tax returns. But in many instances, filing separate returns may actually produce a lower combined federal and state tax. Consequently, separate returns should always be computed. If by filing separate returns, a lower combined tax results, one issue of disagreement can be resolved immediately by the filing of separate returns.

However, when the combined tax liability is less by filing a joint return, several non-tax issues remain. During divorce proceedings a spouse may refuse to file a joint return because of hostility or vindictiveness, or fear of the resulting liability (joint and several) for tax, penalties and interest that is actually due (whether or not correctly shown) on the return.

The price to be paid for not filing a joint return is not only higher tax rates, but loss of some elections, credits, and deductions or exemptions.

Where one party insists, often at the advice of counsel, in filing a separate return at a higher tax cost to the couple, the spouse injured by the separate return filing could be compensated for the additional tax in a property settlement. In effect, this is an insurance premium paid by the spouse seeking protection from joint and several liability. Some judges follow this practice.

SOURCE: DivorceSource