Filing Status and IRS Substitute for Return (SFR)

[Gary2]

Here's an off-the-wall question. If the IRS prepares a substitute return for a taxpayer or taxpayers that they know to be married, are they required to use MFS as the filing status? As an extreme example, suppose a couple has been filing MFJ for years, including two Schedule Cs as a qualified joint venture, skip a year, then file again as MFJ, continuing the joint venture with both Schedule Cs and all the depreciation continued as if the missing year had been done correctly.

This has nothing to do with any real life case, but is purely for documentation purposes. I'd like to be able to write "If a couple is required to file but either files separately or doesn't file at all...", and be guaranteed that the IRS doesn't file a joint return for them. Otherwise I'd be forced to add a footnote that complicates matters.

My intuition says the IRS would have to file MFS, since they couldn't possibly compel one spouse to be liable for the other spouse's part of the return. But I can't find anything in the code or regs that deals with this (and I've not yet learned to navigate the IRM).

[New York Enrolled Agent]

I think §6013 is your answer. §6013(a) provides that married taxpayers may make an election to file a joint return. The election is made on an annual basis.

You are on-target. The IRS could not force joint and several liability on a married couple by filing a substitute for return using joint status. SFRs permitted under §6020(b) are when a person fails to file a required tax return.

[JohnH]

When IRS files a SFR, do they even make a determination regarding marital status, or do they simply prepare it as "Single"? No experience with this - I'm just asking...

[VT-EA]

An SFR is not a comprehensive return; the Commissioner uses only one of two filing statuses--single or married filing separately--and he allows only one personal exemption and no business expenses or personal deductions. See 2 Administration, Internal Revenue
Manual (CCH), pt. 5.19.2.6.4.5 (10), at 18, 322.

Pulled from http://www.ustaxcourt.gov/InOpHistor...er.TCM.WPD.pdf
Filed October 30, 2008.

[New York Enrolled Agent]

When IRS files a SFR, do they even make a determination regarding marital status, or do they simply prepare it as "Single"? No experience with this - I'm just asking...

John

Basically, the IRS will look to see if the taxpayer is a "new entity". Assuming the taxpayers have filed jointly in the past, then the IRM directs the IRS employee to file a MFS for the primary SSN on the account. I believe (though I may be incorrect), the secondary SSN gets single status. If anyone finds something to the contrary please post a correction.

A small piece from IRM 4.4.9.6.2.1

Note:
EFFECTIVE 1/1/2006, if the filing status on Master File is married filing jointly, you will not have to change the name line year. Master File will update the name line year when the SFR is generated on the primary SSN.


Is the filing status for a joint return? If yes, prepare a Form 2363, enter an "X" in the box to the right of the Trans Code 013 to initiate a filing status change to non-joint for the earliest tax period you are establishing and fax to CCP.

Note:
EFFECTIVE 1/1/2006, you will no longer have to do this. Master File will generate an SFR for the Primary SSN and generate a filing status of married filing separately.

[JohnH]

All things considered, this makes sense. Essentially the IRS is generating a SFR based on whatever info they have on hand, using the filing status least favorable to the taxpayer while not dragging a third party into the mix. If the taxpayer had indicated they were married on a previous return but has acceptable information to provide which is helpful to their position (death of spouse, divorce, or MFJ), they are free to provide that filing status info to reduce the tax due on the SFR. Seems as logical & fair as can be under the circumstances.

[taxea]

When IRS files a SFR, do they even make a determination regarding marital status, or do they simply prepare it as "Single"? No experience with this - I'm just asking...

No and they don't pay any attention to dependents. The SFR is taxed at a married filing separate rate because it is the highest. The TP should always file a return when notified that the IRS has done this. If the return is over three years old, TP will not get a refund but they probably will not owe what the IRS decided they owe.