Excerpt: If one spouse has cash based on business and the other believes that not all income is being reported on the tax returns, can an attorney help them establish true income before setting child and spousal support?
An attorney can absolutely help them identify what the income is for purposes of child support and alimony. There are oftentimes cases where people have identifiable income as well as cash components to their incomes, and we wonder whether they are honest about it or not. With regards to the issue of filing the tax return, in New Jersey there is a case that specifically requires the trial court judges to refer the matter to the Internal Revenue Service if they believe that tax fraud exists in a particular case.
If a litigant is concerned that the other side has potentially hidden income or filed tax returns that are not exactly in line with the specific tax of that business’s existence, it’s recommended that they settle the matter outside of court. If they have to go to a third party decision-maker or an alternative dispute mechanism, they can do it through mediation or arbitration so that the obligation to pass that file along to the Internal Revenue Service would not exist.
Oftentimes when people are getting divorced, one spouse gets angry and threatens to turn the other side over to the Internal Revenue Service. The reason why that is not an advisable course of action is that, if it’s a joint tax return, both individuals are going to be potentially exposed to whatever consequence as a result of that tax return being filed – unless the non-titled spouse can qualify for what is called “innocent spouse relief”, which is a very limited and difficult to achieve status that the IRS sometimes, but on an infrequent basis, will award to someone if they meet a certain statutory criteria and they feel that the non-titled spouse truly has no knowledge of or involvement in the concealment of income or the production of a tax return that is not accurate during the course of the parties’ marriage.
Sonya K. Zeigler is a partner at Stolfe Zeigler, a boutique family law firm that obtains favorable outcomes for high-net-worth, complex, and litigious cases.