Tax Return Left Under Doormat for Wife to Sign Never Filed, Failure to File Penalties Apply

Couples often have trouble communicating when they are undergoing a divorce.  But in the case of Plato v. Commissioner, TC Memo 2018-7, the method Mr. Plato used to handle the necessary interaction with his soon to be ex-wife was particularly unique—and ineffective.

The Tax Court opinion describes how Mr. Plato handled the preparation of a joint 2007 return, in particular getting his wife’s signature on the Form 1040 and then having her mail the return on to the IRS:

In the matter of petitioner's divorce action community property assets, including a stock brokerage account and a section 401K retirement account, were liquidated subject to a stipulation order in December 2007. Petitioner prepared and signed a Form 1040, U.S. Individual Income Tax Return, for 2007 reporting the filing status of married filing jointly and a tax liability of $46,073 (joint return).4 On April 15, 2008, he left the joint return and a check for $46,073 “under the mat at the front door” of his wife's residence for her to sign and mail to the IRS.

He also asked his wife to file for an extension of time to file the return (we are not told how he managed to communicate that request).

Unfortunately for Mr. Plato, the IRS never actually received the return in question, the check was never negotiated and the IRS also had no record of an extension request being received.  The Court noted that there was no evidence that the return was signed or mailed, or an extension requested, so presumably Mr. Plato either still didn’t want to talk to his ex-wife or she wouldn’t testify that any of these events occurred.

Eventually the IRS prepared a substitute for return, causing Mr. Plato to submit a new Form 1040, with a married filing separate status for 2007.  The IRS accepted the tax calculation made by Mr. Plato on that return, but also looked to be paid a failure to file penalty for the year in question.  Mr. Plato objected to the penalty.

The taxpayer argued that he had reasonable cause for failing to timely file a return.  As the opinion provides:

Petitioner argues that he had reasonable cause and did not willfully neglect his filing obligation for 2007 because he signed the joint return on April 15, 2008, and then left it and a check for the liability reported on that return “under the mat” of his wife's residence. Petitioner argues that his actions in attempting to file the joint return coupled with his history of compliance in filing tax returns amount to reasonable cause for his failure to file a tax return for 2007.

The Tax Court rejected this defense for two reasons.  First, pointing to the U.S. Supreme Court ruling in the case of Boyle v. Commissioner, 469 U.S. 241 (1985), the Court noted that a taxpayer cannot rely on an agent (in this case his wife) to file a return.  It is the taxpayer’s responsibility to assure the return was filed.

Second, the Court found that his rather unique method of filing that return fell far short of taking reasonable steps to assure the return was filed.  As the opinion notes:

Petitioner left the joint return and a check for $46,073 under the doormat of his wife's residence. Petitioner did not request an extension of time to file the joint return, but he asked his wife to request an extension of time to file. Indeed, petitioner took no further action to comply with his requirement to file a tax return until respondent issued him a notice of deficiency. Additionally, the Court has held that failure to obtain a spouse's signature on a married filing jointly return when the couple is separated does not always constitute reasonable cause for failure to timely file a tax return. See Sutherland v. Commissioner, T.C. Memo. 1991-619.