Tax court summary opinions lack value as precedent, but they are so rewarding in other ways. This week I wrote about the Gill decision which, if sustained, will allow same sex couples who's marriages are recognized by state law to file joint federal returns. Well, as I titled my post on the tax advantages of not being married ,Just because they won't let you do it doesn't make it a good idea. A big draw back to joint returns is the joint and several liability that it creates.
With that said, we now get to empathize with Caron W. Riganti (TC Summary Opinion 2010-113). She found out that she had liability on some joint returns sometime after her divorce. Apparently her practice had been to give her husband her W-2 and whatever other information she had and let him have the return prepared. She discovered that he had not taken the further step of paying the balance due when she received notice that expected refunds had been intercepted to apply to the outstanding balance for the years 2004 and 2005. Laura Brady , another distressed ex-spouse whom the Tax Court couldn't help, whom I discussed earlier this month, found out about her liability the same way.
Apparently the tax debt was not the only unpaid bill that Ms. Riganti thought Mr. Riganti was not stepping up to. The tax court conceded that her request was fairly modest :
Petitioner's request for section 6015 relief was prompted by her belief, triggered by some forced collection action, that she would be required to pay the full amounts of the unpaid portions of the 2004 and 2005 income tax liabilities arising from the joint return filed for each year. As petitioner views the matter, the 2004 and 2005 income tax liabilities should be treated in a manner consistent with the other marital debts taken into account in the agreement; that is, she and her former spouse should each be responsible for one-half of the tax liability for each year. She is not so much seeking relief from those liabilities as she is seeking some assurance that her former spouse will be required to pay what she considers to be his fair share of those liabilities. Because petitioner's former spouse has otherwise failed to live up to other of his financial obligations, we appreciate petitioner's concern that she might be required to pay the full amounts of the outstanding 2004 and 2005 tax liabilities. Her concern, of course, is completely consistent with the concept of joint and several liability.
It was a modest request, but sadly she was apparently not addressing someone who could help her :
We expect it is of no consolation to her to point out that her former spouse remains equally responsible for payment of the outstanding tax liabilities. Nevertheless and simply put, the type of relief she seeks, perhaps available through the local court having jurisdiction over her divorce from her former spouse, is outside that contemplated under section 6015.
The moral of the story is that taxpayers and advisers need to look at joint returns not as a simple exercise of what produces the lowest total tax, but also consider the implications of joint and several liability. There is some relief available, but it is by no means assured.