19 Aug Uh-oh: Estranged Wife Files Separate Tax Return After Husband Files Joint Return
What happens when a divorcing wife files her own separate tax return after her husband has filed a joint return, as he has always done in the past? A recent decision of the U.S. Tax Court – Edwards v. Comm’r, T.C. Summ.Op. 2017-52, deals with this very situation. In that case, the husband who filed the joint return ended up with a bill from the IRS for over $6,000 in taxes and penalties. The lesson? If you are filing a joint income tax return, both spouses must sign the joint returns or IRS Form 8879 authorization to file electronically.
Victor and Sharon Edwards were separated in 2013, but their divorce was not yet final. One day in February 2014, Sharon sent a text message to Victor, proposing to file joint tax returns and split the refund. There is no record that Victor agreed, as they decided to discuss the issue further that evening. Victor then contacted his CPA, who had always filed joint tax returns for Victor and Sharon. Victor supplied all of the information to the CPA, who never spoke to Sharon. Victor signed the authorization (IRS Form 8879) for the CPA to file the joint return, but no one asked Sharon to supply information, review the return, or sign an authorization.
Victor didn’t split the tax refund with Sharon. When Sharon asked him whether they were going to file joint returns, via text message on April 5, Victor responded, “Talk to the judge.” So on April 15, 2014, Sharon filed an extension for herself. Victor and Sharon finalized their divorce and never talked about their tax returns. The divorce was final in September, and then Sharon filed her own tax return, under the “married filing separately” taxpayer status.
Initially, Sharon’s MFS return was rejected. Sharon contacted Victor, who texted back to her, “You don’t need to file.” Sharon filed her MFS return anyway, by postal mail. When the IRS notified her that she had filed two returns, she filed a Form 14039, Identify Theft Affidavit.
The IRS determined that Victor was not authorized to file an income tax return on behalf of Sharon. As a result, he was sent a deficiency notice. Victor lost the benefit of tax withholding that Sharon had paid during the year, as well as her personal exemption, the dependency exemptions for the children (in her custody), earned income credit, and Sharon’s charitable contributions. The IRS assessed a deficiency of $6,000 in income taxes, and a small penalty. The Tax Court affirmed the IRS decision as to the deficiency.