Taxpayer, Never Having Filed a Joint Return, Could Not Obtain Innocent Spouse Relief

A taxpayer who filed her petition in Tax Court asking for innocent spouse relief under IRC §6015 discovered that the Tax Court could not offer her relief because there, in fact, had not been a joint return filed.  In the case of Abdelhadi v. Commissioner, TC Memo 2018-183, the Tax Court ruled that because she had filed a petition for redetermination of the deficiency, the Court could only rule whether she was entitled to §6015 style relief—and, not having actually filed a joint return, there was no such relief available.

The taxpayer had eventually married the other individual shown on the joint 2007 return—but not until 2014.  As the Court noted:

Petitioner met Mr. Abdelhadi in 2001 when she was 18 years old and began living with him on and off in 2003. She continued to maintain a separate residence until 2014. In 2003 she and Mr. Abdelhadi had a daughter, and in 2007 they had a son. In 2011 Mr. Abdelhadi married another woman, but that marriage ended in divorce after 40 days. Petitioner then married Mr. Abdelhadi in 2014.

Even though the couple was not married, Mr. Abdelhadi prepared and filed a joint return for 2007 without the taxpayer’s knowledge.  As the Court noted:

Before her marriage petitioner considered herself single and used her maiden name of Sebree on documents. Nonetheless, a joint Form 1040, U.S. Individual Income Tax Return, was filed for petitioner and Mr. Abdelhadi for 2007. Petitioner did not see, review, or sign that return; she has not seen it since and it is not part of the record. A refund check was issued to Mr. Abdelhadi and petitioner (under her maiden name). Petitioner was unaware of the refund check at the time it was issued and did not endorse it. The signature that does appear on the check does not match petitioner’s signature on other documents in the record. The address on the check was that of Mr. Abdelhadi’s grocery store, not petitioner’s home address. Petitioner knew of the grocery store in 2007 but worked only limited hours there (without pay) because she had to care for a special needs child. She did not work otherwise in 2007 and did not file a tax return for 2007. She did file returns for 2006 and 2008, and for both years she listed her filing status as single.

Unfortunately for the taxpayer that 2007 return was found to have other errors on examination.  The Court continues:

On July 11, 2011, while meeting with an Internal Revenue Service tax examiner, petitioner signed a Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment, and a Form 4549, Income Tax Examination Changes. With respect to the 2007 tax year those forms listed a tax liability for her and Mr. Abdelhadi of $21,790, a section 6662 penalty of $4,358, and interest of $4,023 for a total liability of $30,171. She filed joint Forms 1040 with Mr. Abdelhadi for 2014, 2015, and 2016 and was granted innocent spouse relief for those years. Her portion of the overpayment for those years was as follows: $7,528 (2014), $9,221 (2015), and $8,114 (2016). But in letters advising her of these amounts dated April 13, 2015, April 27, 2016, and May 15, 2017, for tax years 2014, 2015, and 2016, respectively, respondent also [*4] advised her that he would apply the full amounts of these refunds to offset the outstanding 2007 tax liability. The record does not include the date of the offsets themselves.

The taxpayer filed a Form 8857, Request for Innocent Spouse Relief, with regard to the 2007 return.  The IRS denied her request for relief and she then asked the Tax Court for relief.

The taxpayer argues that she should obtain relief since she was not married to Mr. Abdelhadi in 2007.  The opinion explains:

Petitioner maintained at trial that she was not married to Mr. Abdelhadi in 2007, and respondent does not dispute her claim. Nor did she review, sign, or even see the joint Form 1040 filed by Mr. Abdelhadi for 2007. We therefore conclude that she did not file, and could not have filed, a valid joint Form 1040 with Mr. Abdelhadi for 2007. See sec. 6013(a). On that basis she argues that she is not liable for the tax reported on the 2007 joint Form 1040.

The IRS did not dispute the facts she stated but noted that the only relief she had requested was to be given innocent spouse relief under IRC §6015(e), filing what is known as a “stand-alone petition,” and had not requested a redetermination of liability.  As such, no innocent spouse relief is available (she was never a spouse and never actually filed a joint return) and the Court could not address the issue of whether the previously determined liability was in error, as she did not raise that issue in her petition to the Court.

The Tax Court agreed that the IRS was correct as a matter of law, noting:

In a stand-alone case, such as petitioner's, section 6015(e) gives us jurisdiction to determine whether relief is available under section 6015 only. Block v. Commissioner, 120 T.C. 62, 68 (2003). But we can grant relief under section 6015 only if a joint return has been filed. E.g., Raymond v. Commissioner, 119 T.C. at 195-197. We also have held that the filing of a joint return is a condition for relief under section 6015 but not for our review of the denial of a claim for relief. Gormeley v. Commissioner, T.C. Memo. 2009-252. Because petitioner did not file a joint return, there is no relief we can grant under section 6015.

However, what about the fact that she should have no liability, having never actually filed a joint return?  The Court found that it was barred from considering that issue in this case.

…[W]e do not have jurisdiction to order respondent to refund any amounts although she may be entitled to file a claim for refund on the basis that she was not liable for the tax paid toward Mr. Abdelhadi's 2007 tax liability with her retained refunds for 2014, 2015, and 2016.2 And we do not have equitable powers to expand our statutorily prescribed jurisdiction no matter how unfair the circumstances may seem. See, e.g., Commissioner v. McCoy, 484 U.S. 3, 7 (1987); Bokum v. Commissioner, 992 F.2d 1136, 1140 (11th Cir. 1993), aff'g T.C. Memo. 1990-21; Woods v. Commissioner, 92 T.C. 776, 784-785 (1989). Finally, we cannot amend pleadings as petitioner requests to give us jurisdiction to order a [*7] refund of an overpayment even though it appears that she was not jointly and severally liable for the tax owed by Mr. Abdelhadi for 2007. See secs. 6213(a), 6512(b) (generally restricting the Court's jurisdiction to order refunds to cases in which a petition for redetermination of a deficiency has been filed); Rule 41(a) (barring amendments after expiration of time for filing a petition if the amendment would confer jurisdiction over a matter that was not already within the Court's jurisdiction under the petition).