You’ve just received a letter from the Internal Revenue Service (IRS) saying your joint tax return has been determined incomplete. Your spouse, it turns out, didn’t sign the form. What happens now?
If you have a tax preparer who is also a CPA and an IRS enrolled agent, you may have some help clearing the issue up rather easily. If not, you’re on your own, and it may not be a pleasant place to be.
Signatures Are Important
When filing a joint tax return, the IRS considers both spouses equally responsible for all taxes due. They also require both spouses to sign the return, otherwise it’s an incomplete filing and you get that sweet letter from the IRS.
In defending yourself against any penalties leveled against you by the IRS, you may show intent to file, pointing to your prior filing history that indicates intent to file jointly. The IRS is just as likely to point to the spot on the return that states, “If a joint return, both must sign.”
There are two allowed exceptions to this. First, a spouse may sign for the other if they have power of attorney specifically for that purpose. The other is if the non-signing spouse gave oral permission for the spouse to sign as “By Husband/Wife” due to disease or injury physically incapacitating them. An explanation of the reason must be attached to the return in this case.
Why They Are Important
Signatures seem like such a small thing to make such a big fuss over, but the IRS isn’t just looking out for itself, it’s looking out for you, too.
The signatures serve to verify that the return was filed by the person(s) named and certifies that everything contained in the return is true and accurate (under penalty of perjury).
If the IRS determines you failed to file a timely return, you will most likely get slapped with penalties of five percent per month, up to a maximum of 25 percent. This can add up very quickly and become quite expensive.
Two Unlikely Escape Hatches
There are two more arguments that can be made for the missing signature—the substantial compliance doctrine and the tacit consent doctrine. The substantial compliance doctrine basically says that a return does not need to be perfect in order to be valid.
This doctrine requires that the return meet four elements to be a valid return: it has sufficient data to calculate tax liability; it is intended to be a return; it was filed in an honest and reasonable attempt to satisfy the law; and it’s filed under the penalties of perjury.
In a U.S. Tax Court case in the early 2000’s, they ruled on a case that tried the compliance doctrine route and dismissed it saying that while tax law may be complex and confusing, the signature requirement isn’t.
In the same case, the court also shot down the tacit consent, noting that intent to file a joint return is distinctly separate from signing a document under penalty of perjury.
The IRS provides allowance for electronic filing of returns and signatures on those are done through use of a pin and use of Form 8879. The pins are given to each individual when filing from home or given to the electronic return originator (tax preparer) to be used after signing Form 8879.
If you are found to not have filed a valid tax return, you will be facing nonfiling, nonpaying penalties. There are three situations where this occurs: not paying what’s owed; not filing a tax return; or not paying enough tax throughout the year.
For help sorting through any complex tax-related issue, or to engage with our qualified tax preparer services, be sure to contact Klein Hall CPAs.