DIY Legal Forms

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Income Taxes Separation Agreement Provision

1. Agreement to File Joint Returns. Husband and Wife will file a joint income tax return for the current calendar year and for subsequent years, provided

(a) they are eligible to do so and

(b) the total tax liability on such return is less than the liability incurred by filing separate returns. The joint tax return will be prepared by a certified public accountant (CPA) chosen by both parties. Each one shall pay half of the CPA's fees therefor.

2. Share of Tax Liability. The parties individual share of the tax liability on the joint return will not be larger than the tax liability that each party would have paid by filing a separate tax return. Each party's share of the liability or refund on the joint return will be calculated by

(a) determining the sum of the individual income, interest, dividends, capital gains, or other reportable income received by each and

(b) dividing such sum by the total reportable income received by both. Credit will be given to each party for his or her individual withholding or estimated payments. If there is a deficiency assessment on the joint tax return, the amount due will be paid by either or both parties, depending upon whether the deficiency arose from individual income or out of a joint deduction. A CPA selected by both parties will compute the allocation of such deficiency.

3 Warranties. Each party represents to the other, to the best of his or her knowledge:

(a) Each party has paid all taxes due in all previously filed joint income tax returns;

(b) Neither party owes interest or penalties with respect to such previously filed returns; and

(c) No audit or tax litigation is pending or scheduled with respect to such returns.

4. Notice and Cooperation. If there is a deficiency assessment on any past or future joint income tax returns, the party receiving notice of the deficiency will give the other party immediate written notice together with copies of all correspondence received. The same procedure applies to receipt of a refund. Allocation of the deficiency or the refund will thereafter be made in accordance with the provisions set forth in this Paragraph. The parties will cooperate with each other by providing all necessary information and documents in each party's possession to facilitate any tax audit investigation or proceeding.

5. Indemnification. Each party will indemnify the other and hold the other harmless from any claim, damage, or expense arising from previously filed income tax returns, to the extent of the liability imposed at law and/or otherwise sated in this Paragraph.