Husband Not Allowed to Sign Joint Return on Wife's Behalf Where He Claimed Her Mental Illness Rendered Her Decision to File Separately Void

What do you do about filing a joint return if your spouse refuses to sign the return and insists on filing married filing separate? Generally you are out of luck and must file married filing separate. But in the case of Moss v. Commissioner, TC Memo 2017-30 the taxpayer contended that his spouse wasn’t competent to file a return and that he should be allowed to sign the return on her behalf.

The Tax Court outlined the situation as follows:

Mrs. Moss apparently insisted on filing a separate return in April 2009 because she believed she was entitled to a theft loss deduction. Petitioner believes that Mrs. Moss’ mental illness, for which she was hospitalized in 2005 and 2006, left her highly suggestible to news programs covering the “Madoff fraud” and led to the delusion that she had lost $350,000 in 2008. In fact, she had no investments affected by the Madoff fraud. By this time, petitioner believed he served a guardianship function for his wife because a condition of her hospital release in 2006 was that she live with him. To avoid worsening the rift in their relationship caused by her hospitalization, however, petitioner did not seek any official status as a conservator, holder of a power of attorney, or guardian of his wife. It was not until August 2013 that a Connecticut probate court placed Mrs. Moss into a conservatorship, appointing her daughters as conservators.

Mrs. Moss went ahead with her plan to file a separate return, although the return had more than a few issues with it, resulting in IRS adjustments:

In her separately filed return Mrs. Moss checked the "Married filing separately" box. She reported $17,571 in Social Security and taxable interest income, total tax of $1,157, and total payments of $10,156 of unknown source and without instruction as to the overpayment. The entry for “amount applied from 2007 return” was left blank. The return also included a Form 4684, Casualties and Thefts, showing $350,000 in losses. Mrs. Moss reported the result of the Form 4684 calculation on her Schedule A, Itemized Deductions, but claimed only $9,000 in itemized deductions. The filing of a separate return was a significant departure for Mrs. Moss; the 2008 tax year was the only instance, from 1966 to 2011, in which she filed a separate return.

The IRS accepted Mrs. Moss' return but apparently few, if any, of its figures. The IRS assessed $738 in tax and recognized no credits or payments. After receiving no payments, the IRS levied on Mrs. Moss' Social Security payments to satisfy her balance.

Mr. Moss, deciding that his wife’s mental illness was preventing her from being competent in the area, filed a joint return for the same year. He also sought to put the IRS on notice about the matter:

..[A]ttached to it [the joint return] a letter stating that his wife is seriously mentally ill, that the Internal Revenue Service (IRS) should disregard all information she sends, and that the return included her income for 2008 as well as his. Petitioner did not attach any power of attorney that would authorize him to act on behalf of his wife. Mrs. Moss never submitted to respondent any consent for petitioner to file the 2008 return for her.

Per Reg. §1.6013-1(a)(2) a joint return must be signed by both spouses in most cases. The Tax Court outlines the only two exceptions to that requirement:

There are, however, two circumstances in which a return may be accepted as jointly filed even though it is signed only by one spouse: when a taxpayer acts as an authorized agent for his or her spouse, sec. 1.6061-1(a), Income Tax Regs., and when there is sufficient evidence that, despite the lack of a signature, the spouse consented to filing jointly, Estate of Campbell v. Commissioner, 56 T.C. 1, 12 (1971); Strong v. Commissioner, T.C. Memo. 2001-103, 2001 WL 436125.

IRC §6012(b) provides authorizing for filing by an authorized agent if a taxpayer is unable to file a return. The Court notes that “[d]isease, illness, or continuous absence from the United States are all reasons for which a person may be unable to make a return. Sec. 1.6012-(a)(5), Income Tax Regs.” But even in such a case, the provisions of Reg. §1.6012-1(a)(5) regarding an authorized agent must be complied with.

The Court continues:

These provisions require that the return be accompanied by (1) an IRS Form 2848, Power of Attorney and Declaration of Representative, or, a power of attorney authorizing the agent to represent the taxpayer in making, executing, or filing the return; (2) a statement signed by the spouse who is signing the return confirming that the incapacitated spouse consents to the signing of the return; or (3) a request for permission from, and determination made by, the appropriate IRS district director that good cause exists for permitting an agent to submit the return. Sec. 1.6012-1(a)(5), Income Tax Regs.

Mr. Moss did not fulfill any of the criteria in question to sign and file the return as the authorized agent of his spouse.

The first problem is that Mr. Moss did not show she was unable to file a return for 2008:

Petitioner contends that his wife could not file a valid return because of her mental illness. However, a person's previous commitment to a hospital and a spouse’s assertion of mental illness are not sufficient to invalidate an individual’s right to file his or her own return. See Conn. Gen. Stat. Ann. secs. 1-43 (West 2007), 1-54(West 1965) (repealed 2016), 45a-670 (West 2014), 45a-677 (West 2014). But see Rev. Rul. 56-22, 1956-1 C.B. 558. The conservatorship order issued over four years after the return was filed does not satisfy petitioner’s burden to prove that his wife was incapable of filing her own return in April 2009.

As well, even if she had been incapable of filing a return for 2008, Mr. Moss did not show that he was an authorized agent. He did not submit a Form 2848 or other power of attorney to the tax return. The opinion continues:

Petitioner did not file a statement confirming that Mrs. Moss consented to the signing of the return. Indeed, he filed a statement that she refused to sign the return. At the time of the filing of the return, it appears no one other than Mrs. Moss had the authority to file a return on her behalf. See Conn. Gen. Stat. Ann. secs. 1-43, 1-54, 45a-670, 45a-677; sec. 1.6012-3(b)(3), Income Tax Regs. Mrs. Moss was eventually placed in a conservatorship, but this occurred over four years after the filing of the return in issue. Additionally, Mrs. Moss’ daughters, not petitioner, were appointed as her conservators.

Absent filing on behalf of his spouse as an authorized agent, the only other option open to find a joint return had been properly filed when only one spouse signs the return is to show that the spouses intended to file a joint return. This can be found even where the non-signing spouse contends later that they did not intend to do so, if the actions of the non-signing spouse indicate that they had gone along with the joint filing.

The Court explains that situation by citing the Strong case:

In Strong, the Court found that such an intent existed when there was a history of the husband's signing for his wife; the pattern continued even after the taxpayers separated; the wife provided the husband with her Forms W-2, Wage and Tax Statement, so that he could prepare the joint return; and she did not file a separate return until years after the joint return had been filed and accepted. Strong v. Commissioner, 2001 WL 436125, at *11.

However this case’s facts were not like those in Strong. Although there was a long pattern of filing joint returns (every year except the one in question), Mrs. Moss had made it clear she did not want to file a joint return and, in fact, had actually filed a separate return (albeit, admittedly one that had significant flaws).

Under the circumstances the Court found that, under the law, the IRS had properly determined that Mr. Moss’s filing status was that of married filing separately.