A Head of Household Return is Not a Separate Return for Purposes of Applying Tax Court Filing Bar to Electing Married Filing Joint

Reversing the Tax Court, the Eighth Circuit in the case of Ibrahim v. Commissioner, Docket No. 14-2070, reversing and remanding TC Memo 2014-8, the Eighth Circuit found that filing as “head of household” by a taxpayer did not qualify as filing a “separate return” for purposes of IRC §6013(b)(2)(B).

IRC §6013(b) generally provides that a married taxpayer that had previously filed a “separate return” can revise their filing and, with the consent of their spouse, file a married filing joint return.  However such an option is not available if the taxpayer had previously filed a “separate return,” received a notice of deficiency and filed a petition before the Tax Court. [IRC §6013(b)(2)(B)]

In this the taxpayer, who had limited knowledge of English, had filed a return for 2011 claiming “head of household” status.  He was not eligible for that status because he was married and lived with his wife the entire year.

The IRS uncovered this fact and issued a notice of deficiency to the taxpayer.  He filed a petition with the Tax Court at this point, seeking to change his filing status to married filing joint at which point he’d receive a credit and refund.  The Tax Court, holding that the taxpayer had filed a separate return, was not eligible to change his filing status now that a notice of deficiency had been issued and he had filed a petition with the Tax Court.

As the Eighth Circuit panel opinion notes, the issue is whether a return claiming (in this case erroneously) a filing status of “head of household” is to be considered a separate return for purposes of barring a change of status in this situation.  The IRS argued that any filing status other than married filing joint should be treated as a “separate return” for this purpose.  The taxpayer, citing the Fifth Circuit’s ruling in the case of Glaze v. United States, 641 F.2d 339, 342, took the position that the term solely means a filing status of married filing separately.

The Court notes that this section of the code itself does not indicate what definition should be used in this context—the Court determines it needs to look at the IRC as a whole and the legislative history surrounding §6013.  

The Court cites numerous instances where the IRC uses the term “separate returns” requires the individual to be married.  For instance, the filing status is labeled “Separate return” in §1(d) and it states clearly it only applies to those who are married.  As well, an  abandoned spouse who supports a child and qualifies to file “head of household” status is considered to be “not married” per the terms of the IRC.  [§§7701(b)(1)-(3)]

The Court goes to note that there are cases where the IRC doesn’t explicitly tie “married” to filing a separate return that the IRS has issued guidance indicating that “separate return” means a return with a status of “married filing separately.”

The Court notes:

Because the Code consistently uses "separate return" to exclusively mean "married filing separately," the identical words "separate return" have the same meaning in § 6013(b)(1). See Lundy, 516 U.S. at 250. To interpret otherwise would contradict the plain language and harmony of the Code. See Engle, 464 U.S. at 217. Interpreting the Code as a whole, § 6013(b)(1) does not include a head-of-household return as a separate return. See Morgan v. Comm'r, 807 F.2d 81, 85 (6th Cir. 1986) ("Use of the word 'separate' can only be deemed to refer to the filing status of 'married, filing separately.'"); Glaze, 641 F.2d at 342 (§ 6013 "was never intended to cover situations . . . where a taxpayer erroneously lists his status as single rather than married"). Cf. Phillips v. Comm'r, 851 F.2d 1492, 1497 (D.C. Cir. 1988) (holding that the "clear wording of" § 6013(a) allows spouses to file either separate or joint tax return, that § 6013(b) applies when spouses file a joint return after a separate return, and thus § 6013(b) does not apply when no return has been filed).

The Court also found the legislative history surrounding this Section also supported the view that “separate return” meant “married filing separate return.”

Specifically, the Court notes:

Section 6013(b)(2) applies only after the taxpayer first files as married filing separately and then amends his or her initial election to married filing jointly. However, Ibrahim did not ever make an election to file as married filing separately. See Morgan, 807 F.2d at 85 (finding § 6013 “requires a previous election by a married person. That this is a foundational threshold to any application of Section 6013 is apparent from the language contained in the statute itself, the regulations, the legislative history and even the appellant’s brief”). He now seeks a refund for his overpayment in his mistaken head-of-household return. To prohibit him from doing so, when he has yet to make an election, goes against the plain language and purpose of the section.

The Court also rejects the contrary holding found in Revenue Ruling 83-138 which provides that the reference in §6103(b) means any filing status other than married filing joint.  The Court found this ruling at odds with the Code’s plain language that holds a “separate return” applies only to a return with the status of married filing separately.

Thus the Court determined that the taxpayer should be allowed to seek a refund in his case before the Tax Court and sent the case back to the Tax Court.