In Brief

Filing a joint return is generally seen as the default option for married couples. When one spouse neglects to actually sign the return, however, a host of troubles can ensue. The authors detail the regulations surrounding the validity of partially unsigned returns and offer several remedies for couples and advisors caught off guard.

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When one spouse fails to sign a Form 1040 with the other, the consequences are often overlooked or ignored. When the IRS notifies the taxpayers that the form is incomplete, what should they expect? Can tax penalties be assessed? Will the statute of limitations remain open? What are the taxpayers’ defenses in this situation? This article discusses these and other issues in order to start the conversation between CPAs and the couples they serve should this situation ever arise.

Intent to File

Generally, married taxpayers may elect to file a joint federal income tax return [Internal Revenue Code (IRC) section 6013(a)]. Whether a husband and wife intended to file a joint return is important to a determination of whether a tax return qualifies as a joint return [Stone v. Comm’r, 22 TC 893, 900-901 (1954)]. The evaluation of intent considers whether the nonsigning spouse filed a separate return, whether the nonsigning spouse objected to the joint filing, and whether the prior filing history indicates intent to file jointly (Harrington v. Comm’r, T.C. Memo 2012-285).

The Significance of a Signature

IRC section 6061(a) provides that any return or other document required to be made under any provision of the Internal Revenue laws or regulations must be signed. Regulations require signatures of both spouses on a joint tax return [Treasury Regulations section 1.6012-1(a)(5)]. Form 1040 provides space for signatures of both spouses and states: “If a joint return, both must sign.” Instructions for the Form 1040 include the same requirement and unequivocally warn that a Form 1040 is not considered a valid tax return unless signed by a taxpayer.

There are two exceptions to this general rule. First, a spouse may sign a return on behalf of the other spouse if he acts as an agent of that spouse and complies with the requirements of Treasury Regulations section 1.6012-1(a)(5). Whenever a return is made, signed, or filed by an agent, it must be accompanied by a power of attorney authorizing the agent to represent his principal in making, executing, or filing the return. Second, if one spouse is physically unable by reason of disease or injury to sign a joint return, the other spouse may, with the oral consent of the incapacitated spouse, sign the incapacitated spouse’s name in the proper place on the return followed by the words “By Husband (or Wife)” and the signature of the signing spouse. A declaration explaining the circumstances preventing the nonsigning spouse from signing the return must be attached to such a tax return.

Signatures on a tax return not only verify that a return has been filed by the person indicated on the front page of a Form 1040, but also certify (under penalty of perjury) that all of the statements in the tax return are true, correct, and complete to the best of the taxpayer’s knowledge (see IRC section 6065). Spouses should realize that signing or subscribing to any return, statement, or other document verified by a written declaration made under penalties of tax perjury and which a spouse does not believe to be true and correct in every material matter constitutes a felony [IRC section 7206(1)]. Note also that a PIN functions as a signature for e-filed returns.

After making this election, each spouse is jointly and severally liable for the entire tax due for that tax year [IRC section 6013(d)(3); see Butler v. Comm’r, 114 TC 276, 282 (2000)]. A requesting spouse, however, may seek relief from joint and several liability under IRC section 6015(b) or, if eligible, may allocate liability under IRC Section 6015(c).

Delay in Filing a Return

When a joint income tax return fails to include both signatures, IRC section 6651 may impose an addition to the tax for a failure to timely file a return when due “unless it is shown that such failure is due to reasonable cause and not due to willful neglect.” This is equal to 5% for each month that the tax return is late, not to exceed 25% in total.

“Reasonable cause” requires the taxpayer to demonstrate that, even though she exercised ordinary business care and prudence, she nevertheless was unable to file her federal income tax return by the due date [U.S. v. Boyle, 469 U.S. 241, 246 (1985); Treasury Regulations section 301.6651-1(c)]. Willful neglect is defined as “conscious, intentional failure or reckless indifference” (Boyle). The major issue is whether the taxpayers exercised ordinary business care and prudence in handling their original jointly filed income tax return. A secondary issue is whether the taxpayers exercised ordinary business care and prudence in handling the original return when the IRS sent it back for the lack of one of the signatures to stop the running of the section 6651 tax penalty. If alterations to the original filed return show that the taxpayers knew that a signature was missing and that the missing signature would make the return insufficient for some business purposes, and nothing was done, then such conduct does not meet the standard of ordinary business care and prudence (Reifler v. Comm’r, T.C. Memo 2015-199).

The majority rule in the federal court system is that an unsigned return does not start the running of the statute of limitations.

Burden of Proof

In general, the taxpayer bears the burden of proof, except as otherwise provided by statute or determined by a federal court [Rule 142(a)(1)]. When a spouse does not sign a purported joint return, the IRS bears the burden of producing evidence that a joint return was filed [O’Connor v. Comm’r, 412 F.2d 304, 309 (2nd Cir. 1969); Carrick v. Comm’r, T.C. Memo 1991-502]. Thus, although the ultimate burden of proof remains with the taxpayers, the IRS bears the burden of going forward with evidence from which a court could conclude that the taxpayers intended to file a joint return (Esposito v. Comm’r, T.C. Memo 1991-262). The IRS also has the burden of proving an individual’s liability for any addition to the tax under IRC section 6651(a)(1), as well as any allegation in a taxpayer’s answer concerning the increase in the IRC section 6651(a)(1) amount [IRC section 7491(c); Rule 142(a)(1)]. The burden of showing reasonable cause under section 6651(a) remains on the taxpayer (Higbee v. Comm’r, 116 T.C. 438, 446-448 (2001)].

Substantial Compliance Doctrine

The substantial compliance doctrine states that a tax return need not be perfect to be valid (e.g., Badaracco v. Comm’r, 464 U.S. 386, 397 (1984); Zellerbach Paper Co. v. Helvering, 293 U.S. 172, 180 (1934); Florsheim Bros. Drygoods Co. v. U.S., 280 U.S. 453, 459-460 (1930)]. Furthermore, case law has significantly changed the apparently compulsory language of the IRC with respect to compliance with tax return requirements. Indeed, in Florsheim, the Supreme Court in dicta mentioned that tax returns may be imperfect and contain mistakes. In Zellerbach, Justice Benjamin N. Cardozo, speaking for the Court, stated that even though at the time of filing the omissions and inaccuracies in a return were such to require an amendment, if a return “purports to be a return, is sworn to as such … and evinces an honest and genuine endeavor to satisfy the law,” it will be saved from nullity. Badaracco confirmed that even a fraudulent return could be sufficient to trigger the running of the period of limitations if, on its face, such a return meets the Zellerbach test.

The Tax Court in Beard v. Comm’r [82 T.C. 766, 777 (1984), aff’d per curiam, 793 F.2d 139 (6th Cir. 1986)] clarified the elements of the Supreme Court test in Florsheim to determine whether the filing of a document is sufficient to trigger the running of the period of limitations for the purposes of IRC section 6651(a)(1). The Beard test includes four distinct elements: 1) the taxpayer must execute the return under penalties of perjury, 2) the return must have access to sufficient data to calculate tax liability, 3) the document must purport to be a tax return; and 4) the return must reflect an honest and reasonable attempt to satisfy the requirements of the tax law.

The majority rule in the federal court system is that an unsigned return does not start the running of the statute of limitations [Kalb v. U.S., 505 F.2d 506, 508 (2d Cir. 1974)]. The general rule when a tax return is unsigned is that it is invalid [Olpin v. Comm’r, 270 F.3d 1297, 1300 (10th Cir. 2001), aff’g T.C. Memo 1999-426]; thus, inclusion of the taxpayer’s signature is a prerequisite to the validity of the tax return for purposes of the statute of limitations [Bachner v. Comm’r, 81 F.3d 1274, 1280 (3d Cir. 1996), remanding 109 T.C. 125 (1997)]. Failure to satisfy the requirements for filing a return is fatal to the validity and timeliness of the return [Elliott v. Comm’r, 113 T.C. 125, 128 (1999)].

An invalid return remains invalid even if the IRS accepts and processes it; acceptance cannot cure an invalid return (e.g., Olpin). IRS acceptance of a return plus payment also does not waive the statutory requirements for a valid return (Downing v. Comm’r, T.C. Memo. 2007-291). Furthermore, IRS personnel may not waive the signature requirement for purposes of a valid joint return (Julicher v. Comm’r, T.C. Memo. 2002-5). The requirements for a return to trigger the running of the period of limitations are the same as those for the purpose of a IRC section 6651(a)(1) analysis (Beard); thus, the signatures of both spouses on a joint return are necessary to meet the validity requirements for IRC section 6651(a)(1) purposes. If the IRS sends a tax return back to the taxpayers with instructions to correct it for the lack of a W-2 and one signature, and the taxpayers resubmit the return within the time provided by the IRS, the return is not subject to an addition to tax under section 6651(a)(1) because the initial return is deemed to have been timely filed (White v. Comm’r, T.C. Summary Opinion 2002-101).

The substantial compliance doctrine excuses some inaccuracies and mistakes as long as an honest and reasonable attempt to comply with the tax law requirements has been made. Signing a return under penalty of perjury, however, is a separate and distinct requirement. The IRS has extensive procedures for handling unsigned tax returns (e.g., Internal Revenue Manual

Tacit Consent Doctrine

As stated above, it is well established by a long line of cases that a joint Form 1040 filed with the signature of only one spouse is valid if both the husband and wife intended to file a joint return [e.g., Estate of Campbell v. Comm’r, 56 T.C. 1, 12 (1971)]. This exception generally applies when one spouse signs a joint return (usually signing for both spouses) and it is shown that the other spouse tacitly consented to the joint return filing; this is commonly referred to as the tacit consent doctrine [e.g., Hennen v. Comm’r, 35 T.C. 747, 748 (1961)]. The tacit consent doctrine is relevant only to the issue of determining whether the spouses are jointly and severally liable for the income tax return that they intended to file jointly; it has no bearing on whether a Form 1040 signed by one spouse but not the other is an income tax return within the meaning of IRC sections 6011, 6061(a), and 6651(a).

There may be numerous reasons why a spouse fails to sign a joint tax return, ranging from oversight to express refusal to file jointly.

Courts generally apply the tacit consent doctrine when one spouse signs a joint return for both spouses and it is later shown that the other spouse has tacitly consented to the joint return filing (e.g., Reifler v. Comm’r, T.C. Memo. 2013-258). Returns with two signatures are sufficient under the Beard test on their face. The absence of a spouse’s signature on the return removes the presumption of correctness ordinarily attaching to the IRS’s determination of jointness (O’Connor v. Comm’r).

The facts surrounding both the signing and submission of the Form 1040 may contain too many blanks to preclude the existence of alternative explanations as to the absence of the spouse’s signature on the Form 1040. In other words, silence does not necessarily mean “yes.” A court may not take taxpayers’ self-serving testimony at face value (Reifler v. Comm’r).

There may be numerous reasons why a spouse fails to sign a joint tax return, ranging from oversight to express refusal to file jointly. Courts are reluctant to extend the reasoning from the cases discussing valid-on-their-face tax returns purportedly signed by both taxpayers to situations where one of the required signatures is missing. Extending the tacit consent doctrine to situations with a missing signature may create an exception that would disregard the rule. Existing procedures described in the Treasury Regulations and Internal Revenue Manual counteract this possibility and provide guidance on how to handle documents when one of two required signatures is missing. At the very least, a nonsigning spouse who did not intend to file a joint return (e.g., in process of divorce) may be alerted that something is wrong. Existing regulations also provide an option for one spouse to sign on the other’s behalf as an agent, as detailed above. A signature under penalty of perjury has added significance when it comes to determining liability for any unpaid taxes or related penalties.

Electronic Filing Signature Authorization

There are three methods for taxpayers to sign their tax returns when electronically filing them; each allows the use of Personal Identification Numbers (PIN) to sign the return. The spouses must sign and date the Declaration of Taxpayer (Form 8879) to authorize the origination of the electronic submission of the return to the IRS before transmitting it. New e-signature guidance allows taxpayers to e-sign Form 8879 from their home computer.

Form 8879 is also the declaration document and signature authorization used for an e-filed return when an electronic return originator (ERO) enters or generates the taxpayer’s (spouse’s) PIN on the e-filed individual income tax return. The ERO, who is a paid tax return preparer, must have the spouses execute Form 8879 before the return is electronically submitted and then must sign the ERO declaration on Form 8879. The ERO retains the Form 8879 and does not submit it to the IRS.

Spouses who prepare their own returns using software must use the self-select PIN method. This allows taxpayers to select five digits (except 00000) to enter as an electronic signature. The prior year adjusted gross income (AGI) or prior year self-select PIN, as well as the taxpayer’s date of birth, is needed for the IRS to authenticate the taxpayer. For joint returns, both spouses must create PINs.

Taxpayers unable to recall their original prior year AGI or PIN were previously able to request a temporary PIN from the IRS with the “Get Your Electronic Filing PIN (EFP)” application. However, the IRS announced on June 23, 2016, that this method is no longer available due to questionable activity by fraudsters. The Practitioner PIN method, however, is still available. Under this method, a taxpayer may authorize a paid tax preparer to enter or generate a five-digit PIN on the taxpayer’s behalf. As with the ERO method of filing, the taxpayer must sign a completed Form 8879, which the paid tax preparer will retain.

Ray A. Knight, JD, CPA/PFS, CGMA is a professor of accounting at Elon University, Elon, N.C.
Lee G. Knight, PhD is a professor of accounting at Wake Forest University, Winston-Salem, N.C.