Filing Taxes (and Dividing a Tax Refund) During a Divorce Case

When a married couple is going through a divorce case, the issue of how to file taxes and what to do with a tax refund often arises. Properly handling such a tax situation is important.

A common issue in divorce cases is how taxes should be filed while the couple is still married. Since the couple is still married, it is possible to file jointly, or to file separately. In some cases, it makes the most sense to file jointly so as to maximize any tax refund that can be had, and then decide later how to divide that refund. For example, if one spouse worked and the other did not, it would almost never make financial sense to file separately. In divorce cases where there is not agreement as to how the refund is to be divided, courts will often order that the refund be held in trust until there is a court hearing to decide how to divide it between the spouses.

Matters can be complicated by a situation where one spouse has taken action that will result in a reduced refund (or tax money being owed). That can happen due to back child support, tax penalty from withdrawal from a retirement account, etc. In such a situation, it is not uncommon for one spouse to see it as “unfair” for their portion of what could have been a hefty refund consumed by the other spouse’s tax debt.

Problems can also arise when one spouse has improperly filed for taxes by forging the other spouse’s signature. Such cases are far from rare, and when a spouse has taken such an improper action it is important to document the matter, and take the appropriate corrective action (often with both the IRS and the court). The courts in both Illinois and Iowa take a dim view of spouses who forge tax documents in order to improperly take a tax refund.