Appeals court finds joint return signed by only one spouse is valid
While the general rule is that a joint income tax return is not valid unless signed by both spouses, a recent appeals court decision should serve as a reminder that there are situations where a return signed by a single spouse may be valid if the IRS can show the couple intended to file a joint return. In its decision on the issue, the U.S. Court of Appeals for the 2nd Circuit found the taxpayers had filed a joint return despite the couple’s son having signed his mother’s name to the return without authority to do so.
The court’s decision on Soni v. Comm’r, No. 22-829-ag (2nd Cir. 2023) affirmed a prior finding by the U.S. Tax Court that a joint return was valid even if someone else had signed a spouse’s name. The Tax Court ruled that the “tacit consent rule” allows a court to find that an intent to file jointly may be inferred from the non-signing spouse’s approval or consent. The ruling came on a taxpayer’s challenge to an IRS determination that a couple owed $642,629 for the tax year at issue.
Non-signing spouse did not participate in financial matters
The taxpayers in the case, Om and Anjali Soni, were married for more than 40 years and had a son, Kunal. Om was a businessman and Anjali “took care of the home.” Kunal worked for his father.
Om handled the family finances and Anjali did not take part in any financial matters. She also maintained that she trusted her husband to handle the couple’s financial affairs, including tax matters. While she said she was generally aware of federal tax filing requirements, Anjali never signed a tax return or asked anyone to sign a return on her behalf. When Anjali’s signature was required on a document, Om would often give it to Kunal, who would sign it with her name. The Sonis filed joint returns from 1999 through 2003, and from 2005 through 2014.
The return at issue in the case was the 2004 federal return filed by the Sonis. They claimed a loss deduction of more than $1.78 million stemming from their S corporation, the Beauville Corporation. Om had an ownership interest in Beauville but did not keep records for it. Based on the claimed loss deduction, the Sonis claimed a $73,470 refund for 2004. While Anjali’s signed name appears on the return, she did not actually sign it.
IRS rejects $1.78 million claimed business loss
It is not clear when the IRS began examining the Sonis’ 2004 return, but the IRS received eight signed extension forms that extended the limitations period for examining the returns from Nov. 14, 2008, to Dec. 31, 2015. One of the extension forms contained the signatures of Om, Anjali and their representative, while the other seven bore the signatures of Om and Anjali.
At the conclusion of its examination, the IRS found the Sonis had not produced evidence supporting their claimed $1.78 million loss and that they were not entitled to a deduction based on that amount. The agency issued a deficiency notice in March 2015, which said the couple owed an additional $642,629 for 2004 and a $28,835 penalty for failing to file the return on time.
The Sonis filed a joint petition with the Tax Court, asking it to review the IRS’s determinations regarding several issues, including that they had filed a valid joint return. In an amended answer to the Sonis’ petition to the Tax Court, the IRS stated that they also owed a $128,526 accuracy-related penalty.
IRS evidence showed intent to file jointly
The 2nd Circuit said the Tax Court was correct in finding that the Sonis intended to file a joint return. While evidence of intent can vary depending on a taxpayer’s circumstances, the 2nd Circuit said it had previously found that a couple intended to file jointly after the IRS produced evidence that:
- The non-signing spouse knew the return must be filed
- The non-signing spouse knew of the signing spouse’s “expert knowledge” of the requirements for preparing and filing a return
- The spouses filed a joint Tax Court petition
- The spouses filed a delayed challenge to the IRS’s characterization of the return as joint
- The return filed in one spouse’s name included both spouses’ income and deductions
- The non-signing spouse had substantial gross income
The 2nd Circuit then found the IRS had produced evidence of the first four items with regard to the Sonis. It added that the fact the Sonis filed joint returns from 1999 through 2003 and from 2005 through 2014 further supported that the Sonis intended to file jointly.