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Taxpayer Can File Joint Return after Erroneously Filing as Head of Household

(Parker Tax Publishing November 2017)

A taxpayer whose tax return erroneously indicated her filing status as head of household was allowed to file a joint return after she received a notice of deficiency denying her an earned income tax credit because she did not file a joint return. The Tax Court held that Code Sec. 6013(b)(2)(B), which prohibits the filing of a joint return in certain situations, did not apply because the taxpayer's erroneous filing was not an election to file separately. Knez v. Comm'r, T.C. Memo. 2017-205.

Patricia and George Knez were married throughout 2014 but lived separately during that year. On her 2014 return, Mrs. Knez gave her filing status as head of household, listed her daughter as a dependent, and claimed an earned income tax credit (EITC) of approximately $1,900. Her husband filed his return as a single filer and he claimed an EITC of around $1,700. Mr. and Mrs. Knez both provided the same direct deposit information on their returns and requested that the funds be deposited into their joint bank account.

In April 2016, the IRS sent Mrs. Knez a notice of deficiency for 2014. The notice changed her filing status to married filing separately, adjusted her standard deduction accordingly, disallowed her claimed EITC, and determined a penalty of $102. The notice stated that, in order to claim the EITC, married couples must file a joint return. Thus, the IRS denied the EITC because Mrs. Knez did not file a joint tax return. The IRS also proposed to restrict Mrs. Knez from claiming the EITC for the next two years due to her alleged reckless or intentional disregard of the rules and regulations governing the EITC.

The Knezes filed a revised 2014 tax return electing the filing status of "married filing jointly," listing their daughter as a dependent, and claiming an EITC of approximately $3,300. The return showed no tax liability and requested a refund of $2,600, which the IRS denied. Mrs. Knez filed a petition with the Tax Court. The IRS filed a motion for summary judgment.

In general, if a taxpayer files a separate return in a year for which a joint return could have been filed, the taxpayer can nevertheless revise that return and make a joint return for that year. However, under Code Sec. 6013(b)(2)(B), a joint return is not permitted once a separate return has been filed if a notice of deficiency has been mailed to either spouse and the spouse receiving the notice files a Tax Court petition.

The Tax Court found that the Knezes were not barred from filing a joint return because their erroneous filing statuses did not constitute separate returns for purposes of Code Sec. 6013(b)(2)(B). The Tax Court followed its decision in Camara v. Comm'r, 149 T.C. No. 13 (2017), where it unanimously held that a separate return means a return on which a married taxpayer has claimed the permissible status of married filing separately, and not a return on which a married taxpayer has claimed a filing status not properly available to the taxpayer.

The Tax Court explained that the Camara decision rested on two principal factors. First, Code Sec. 6013(b) characterizes the right to file a joint return after filing a separate return as an election, which implies the notion of a choice. The Tax Court reasoned in Camara that there is no choice involved where a return indicates a filing status that is not legally available to the taxpayer. Second, the legislative history supported this conclusion because courts have held that the filing status election is irrevocable and Congress intended Code Sec. 6013(b) to alleviate problems arising from married taxpayers' inability to change a permissible election. According to the Tax Court, the legislative history strongly suggested that the term "separate return" as used in Code Sec. 6013(b) means a return filed as married filing separately, because that is the only status (other than joint filing) that is permitted for married taxpayers.

In this case, the Tax Court found that Mrs. Knez did not elect to file as a head of household because that status was not legally available to her. Her erroneously filed original return was therefore not a separate return in the Tax Court's view. Because Code Sec. 6013(b)(2)(B) applies only if an individual has filed a separate return, the court concluded that the prohibition against filing a joint return did not apply. The Knezes were therefore free to file a joint return for 2014, even though their joint return was filed after the IRS had issued a notice of deficiency to Mrs. Knez and she had petitioned the Tax Court.

For a discussion of changes in filing status after a return is filed, see Parker Tax ¶10,570.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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