A Party’s Tax Returns Are Generally Protected from Disclosure in Litigation… But Not Always

HNWShareholder Rights Litigation

tax return privacyThe NJ Court Rules control the procedural aspects of all litigation in the state.  Rule 4:10-3 allows a court to prevent the disclosure of certain discoverable information “for good cause shown . . . to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.”  “Good cause” is determined on a case-by-case basis.

The “[d]isclosure of a litigant’s tax return is . . . a highly sensitive matter.”  Generally, “[a] taxpayer is entitled to non-disclosure of his or her [tax] return absent a ‘strong need’ for information contained in the return.”  But the production of tax returns can be ordered if “it clearly appears they are relevant to the subject matter of the action or to the issues raised thereunder, and further, there is a compelling need therefor because the information contained therein is not otherwise readily obtainable.”

In one reported case, the Appellate Court stated, “We see no abuse of discretion in the trial court’s order requiring the production of defendants’ tax returns if they or their expert witnesses ‘intend to use any information contained within these tax returns at trial or in preparation of any expert report.'”

A trial court must recognize the sensitive nature of the production of tax returns and appropriately narrow the circumstances of their production. A taxpayer can petition a judge to exclude or redact any parts of the relevant tax returns so as to protect the taxpayer’s privacy about information within those documents that is irrelevant or not likely to lead to the discovery of relevant information.

If you are looking for additional details on this topic or if you require advice about your situation, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Shareholder Litigation Attorney

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