Watch our YouTube video on issues relating to Joint Tax Returns. Or read on for more details!
Filing a Joint Return
Filing a joint tax return allows married taxpayers to enjoy favorable tax rates. However, this benefit comes with a cost. The cost is that spouses who file a joint tax return have joint and several liability for the tax on their returns. This means that the IRS can collect the tax from either spouse, even after a divorce. It does not matter which spouse earned the money.
For spouses who are undecided about joint or separate tax filing, they do have the option to use married filing separately status and then amend the return later to file a joint return. However, it does not work the other way. Spouses may not amend a joint return in order to file two separate returns.
Divorce Decree is Not Binding on The IRS
Divorce decrees sometimes stipulate that a particular spouse is liable for the tax liability on a joint return. However, the IRS is not bound by this stipulation. The spouses remain jointly liable for the tax, despite what the divorce decree says. However, the spouses do have the option to sue each other for the tax.
The most challenging issue on the topic of joint returns is whether or not a return is even considered to be jointly filed. This matter comes up when one spouse wants to avoid joint liability. The argument often relates to forged or missing signatures on returns.
The IRS and the courts will ask if the couple intended to file a joint return. Clearly, a signed return shows proof of intent. This can be a signed paper return (the type we mail at the post office) or signatures on Form 8879, the authorization form to e-file a tax return.
Sometimes there is an issue with a signature. For example, the signature could be missing or forged. In that case, the IRS looks to see if there was express consent. This refers to the situation where one spouse expressly authorizes the other spouse to sign the return. This will be considered to be a valid joint return.
In addition, the IRS and the courts also look for tacit consent. This refers to the situation where one spouse agrees to the filing of a joint return without actually saying so. Returns filed with tacit consent are deemed to be valid joint returns. Examples of tacit consent include:
– A couple of file returns without both signatures for years. Are they objecting now just because there is a tax due?
– The objecting spouse earned income and must have known that a return was required even if they never signed it or their signature was forged.
– A spouse participated in the preparation of the returns
– A couple wanted the return filed for a non-tax reason, such as a mortgage application
Lastly, returns signed under duress are not valid returns. However, a spouse has to pass difficult tests to prove duress. They have to prove that they were unable to resist the demands to sign the return. And, they have to prove that they would not have signed the return had they not been forced to do so.
When all is said and done, if a joint return was in fact filed and both spouses are liable, the next step is to look at Innocent Spouse Relief. Please check out our blog post on the Innocent Spouse for details as to how that works.
Founded by Gary Massey, CPA, Massey and Company is a boutique CPA firm located in Atlanta, providing tax and accounting services to small businesses and individuals throughout Georgia.