October 1, 2014

File your tax returns in a timely manner, or your filing status may be determined for you – by the IRS.

That’s the lesson Donald Thomas Salzer and his wife learned the hard way. They failed to file income tax returns for 2008 and 2009. Mrs. Salzer had refused to sign the 2008 and 2009 tax returns for political reasons.

Salzer and his wife had filed under the married filing jointly status from 1985 through 2007. However, when the IRS prepared returns for Salzer and his wife for 2008 and 2009, it selected the filing status of married filing separately for the taxpayers.

The difference in tax rates between the two filing statuses caused the taxpayers to have a deficiency on the returns for both years in question. Under normal circumstances, with the taxpayers filing jointly, they would have received a refund as they did in 2007. The amount of the 2007 refund was $1,375.

The taxpayers’ situation in 2008 and 2009 was almost identical to that of 2007. Salzer was still married, still had two dependents, had the same job, and was withholding in a similar manner. The taxpayers would have received a refund for 2008 and 2009 had the returns been prepared with the filing status of married filing jointly.

The Tax Court ruled recently that an individual was not entitled to claim joint filing status for a return prepared by the IRS after the individual and his wife failed to file a return for two years. The court further stated that joint return rates apply only if a married individual files a return jointly with his or her spouse. Joint filing status cannot be imputed (Donald Thomas Salzer v. Commissioner, T.C. Summary Opinion 2014-59, June 24, 2014).

The court imposed penalties for failure to timely file and pay tax since the husband failed to address the penalties at trial. The amounts of the penalties are still in dispute and will be settled by the US Tax Court Rules of Practice and Procedure.

Take seriously your responsibility to file your tax returns in a timely manner. If the IRS has to prepare your returns for you, under certain circumstances, they can change your filing status.

This case was tried in the U.S. Tax Court Small Case Division. The decisions do not serve as precedent for other taxpayers but are indicative of how the Tax Court may rule in a similar situation.

This article was originally posted on October 1, 2014 and the information may no longer be current. For questions, please contact GRF CPAs & Advisors at marketing@grfcpa.com.