When is a Joint Return Not a Joint Return?

The tax court recently ruled on a case complicated by a divorce that was in-process at the time of filing. The lack of clarity, in this case, resulted in time, aggravation, and expense for both parties—highlighting the need for clear and indisputable documentation.

In June of 2013, a husband petitioned for divorce; however, the couple was still legally married on the last day of 2013.

According to the case, the wife sent a text message to her husband at the beginning of 2014 and proposed that they file a joint return for 2013. As the taxpayer, the husband agreed. The couple used the same tax preparer as in previous years—the wife historically signed the e-filing authorization form each year to indicate her acceptance of the filing, yet did not in 2013.

In April, she inquired again whether they should file a joint return and was directed by her soon-to-be-ex-husband to “talk to the judge about it.” And so on April 15th, the wife filed an extension form. 

As the divorce proceedings went on, the attorneys concluded that the wife believed that her husband had filed married-filing-separate on his own behalf and had also claimed the two children as his dependents. Their divorce was finalized in September of 2014 with no mention of the couple’s tax status in the divorce decree

On October 6, 2014, the now ex-wife filed her own married-filing-separate return for 2013, which the IRS rejected. She responded with a letter indicating her belief that her ex-husband had filed a return on her behalf that she did not authorize. 

At this point, the tax court became involved and alerted the ex-husband that, due to the change in filing status, he owed $6,244 plus penalties. 

The tax court then had to decide which of the wife’s returns to accept: (a) joint return or (b) married-filing-separate. 

There are a number of facts and circumstances that the tax court examined including whether: 

  1. the returns were prepared pursuant to an established practice (history) of preparing a joint return;

  2. the non-signing spouse failed to object to the filing of a joint return;

  3. an affirmative act was taken indicating an intention to file other than jointly;

  4. one spouse entirely relied on the other spouse to file the returns;

  5. the spouse examined returns presented for signature;

  6. separate returns were filed;

  7. the returns included income exemptions with the non-signing spouse; and

  8. the non-signing spouse was aware of the content of the purported returns. 

Ultimately, the tax court did not find either the taxpayer or his ex-wife entirely credible. Yet based on their communications and the ex-wife’s filing of her own married-filing-separate return, the court concluded that the ex-wife did not agree to file a joint return.  

This case underlines the need for permission and how important it is that filing is done officially, particularly during periods of transition like divorce.

Contact me with questions or comments.

Susan A. Moussi, CPA, CFP®, CDFA SMD Tax & Divorce Financial Planning Consultants, Inc. Phone: 614.429.4172 susan@smdtaxanddivorce.com