Joint return not signed by wife was not a valid return despite intent to file jointly
Couple Loses Arguments with IRS in Tax Court
Regulation 1.6012-1(a)(5) of the tax code requires the signature of both spouses on a joint tax return. And the instructions are clear on Form 1040, “If a joint return, both spouses must sign. Form 1040 is not considered a valid tax return unless signed by a taxpayer.” Code Sec. 6651(a)(1) is also clear. It imposes a penalty for failure to submit a timely tax return unless there is a “reasonable cause.” What constitutes reasonable cause? The taxpayer must have exercised ordinary business care and prudence to file an income tax return by the due date and still was unable to file timely.
With that background in the tax law, here’s what happened to Mr. and Mrs. Reifler. This married couple had been married since 1988. During their married years, they employed accountant Mr. Meyerowitz to do their tax returns. Each year that this couple was married, they filed joint returns, including a joint return for 2000. However, things went awry in 2000. Mr. Reifler signed the return and left it for his wife to sign. The problem is that Mrs. Reifler did not sign it. Unknowingly, Mr. Reifler went ahead and mailed it to the IRS and was in compliance with the due date of October 15, 2001.
The IRS Service Center
As a result of Mrs. Reifler not signing the tax return, the IRS Service Center returned the couples’ joint return. Although the Internal Revenue Manual stipulates that the examining agent must attach forms, explain the reason for the returned tax form, outline steps for remedy and state the deadline for compliance, the taxpayers claimed this wasn’t done. They only received the original 2000 return. Mr. Reifler explained that he thought it was just copies of his tax return. As a result, the couple did not send the original return back.
In 2002, the couple received a delinquency notice from the IRS. The taxpayers then signed a second Form 1040 but did not include any correspondence explaining their position to the IRS. In turn, the IRS treated the second 2000 return as the original income tax return for 2000. Its claim was that Mr. and Mrs. Reifler did not file in a valid, timely manner.
The Couples’ Arguments
Mr. and Mrs. Reifler used two arguments to support their claim of filing a valid, timely joint return. The first argument was based on the substantial compliance doctrine. This doctrine represents the idea that a tax return doesn’t have to be perfect to be considered valid. And there have been some cases where this doctrine prevailed in Supreme Court. But, the court fought back stating that the signature under penalty of perjury and an reasonable attempt to satisfy the tax law are two distinct requirements. The Reiflers then cited White, TC Summary Opinion 2002-101. This was a case when married taxpayers submitted a joint tax return that was not signed by one of the spouses. The IRS sent instructions on how to fix the defects, and the taxpayer followed up. As a result, the court did not impose a late filing penalty.
Unfortunately, the tax court took a different turn for the Reiflers. The court conceded that the White case was a non-precedential summary opinion, which does not bind or require the IRS decisions for future cases. It was also the court’s contention that a taxpayer cannot avoid liability by showing that others have been treated generously by the IRS.
The reasonable cause test also failed with the courts. The court found that the couple did not exercise ordinary business care and prudence in their handling of the 2000 return, noting that Mr. Reifler was a sophisticated businessman. There was no evidence that he made any attempt to consult with his accountant until he received the IRS delinquency notice.