Federal “joint liability”
When you file a “married-joint” federal income tax return, both spouses are liable for 100% of the liability shown on the return, and for any additional liability assessed, such as on audit. The IRS can collect the entire liability for either spouse, even if the tax is a result of income or matters that one spouse did not know about when initially filing the return (e.g., unreported income assessed on later audit).
Even after divorce, the IRS can collect the entire unpaid balance from either spouse, even if the judge in the divorce orders one spouse to pay the entire liability. The IRS was not a party to the divorce and is not bound by the divorce decree.
A spouse can request innocent spouse relief from joint liability, or if the spouse not liable for the other spouses tax debt (e.g. from a separate-married return, or a return from prior to their marriage), they can request injured spouse relief, e.g., to obtain their portion of a tax refund on a new joint return filed with the spouse who owes tax.
Missouri “combined” income tax liability
Spouses are required to file a “combined” return in Missouri when they file a federal joint return.
However, unlike federal joint returns for husband and wife, a Missouri combined return of a husband and wife does NOT impose “joint and several” liability.
For a combined return, each spouse is only liable for their own tax on their separate income, as adjusted for their determined portions of itemized deductions or the standard deduction, and exemptions, etc.
For this purpose, “separate” income means the income from each spouse’s earned income (e.g., wages), income from the spouse’s separately owned property (e.g., stock), and their portion of the income on jointly owned property, such as dividends on jointly owned stock, which is divided between them and each spouses’ portion listed separately for each spouse.
R.S.Mo. § 143.491. Returns by husband and wife.
1. A combined return shall be filed by a husband and wife who file a joint federal return even though one of them has neither income nor deductions. The tax liability of the two taxpayers shall be separate and not joint and several.
2. Separate returns shall be filed by a husband and wife who do not file a joint federal return.
In Paulson v. Missouri Dept. of Revenue, 961 S.W.2d 63 (Mo.App. W.D.,1998), the court stated “The Paulsons were required to file a combined Missouri return because they filed a joint federal return. Section 143.031. However, the liabilities of Paulson and his wife were separate, not joint and several. Section 143.491.”
An initial problem is the Missouri form on which spouses file a combined returns calculates each spouse’s tax liability separately, but then combines the liability, takes credit for withholding, etc., and records a single liability for both spouses. The Department of Revenue (“DOR”) computer system apparently does not separately track each spouse’s liability.
When calling the DOR, the DOR employee may incorrectly refer to the liability as “joint”, and state or infer that both spouses are liable for the total amount due. Regardless, each spouse is only liable for the tax on their separate income.
Request to separate liability
You must submit a written request to have the liability separated. The Department of Revenue will not separate the liability based on a telephone request.