Applying Joint Estimated Tax Payments When Filing Separately

Sometimes, a married couple who has filed jointly in the past and made joint estimated income tax payments for the current tax year, decides to file separately for the current tax year. The question arises as to how the payments should be allocated between the spouses. The answer is in Regs. Sec. 1.6015(b)-1(b), which provides that when a joint declaration of estimated tax is made, but a joint return is not filed for the same tax year, the payments may be treated as being made by either spouse or may be divided between them in any manner agreeable to them. If the spouses do not agree to a division, the payments are to be allocated to each of them in the ratio of eachs separate tax to the aggregate tax imposed.

Example: Hs 2004 tax is $6,000 and Ws is $14,000; their total joint 2004 estimated tax payments were $12,000. Thus, 30% ($6,000/$20,000) of the $12,000 total payment, $3,600, applies to H; 70% ($14,000/$20,0000), $8,400, applies to W.

The regulations cited above were issued under former Sec. 6015, Declaration of Estimated Income Tax by Individuals, which was repealed in 1984. Current Sec. 6015 contains the innocent spouse rules. As explained in Chief Counsel Advice (CCA) 200011047, the Service has continued to follow the Regs. Sec. 1.6015(b)-1(b) allocation rules; see Bell, 818 FSupp 444 (DC MA 1993), in which the district court held that the IRS could use that regulation to allocate estimated tax payments.

Recommendations

If each spouses return is prepared by a different firm, it is highly recommended that the spouses and their tax advisers discuss the allocation of the payments and try to reach agreement, to avoid an IRS notice. Statements showing the allocation should be prepared and prominently attached to the returns.

If no agreement can be reached, the spouse who made the actual payments should consider attaching an explanatory statement to the return and providing copies of any documentation (e.g., cancelled checks), showing that the amounts were from bank accounts titled only in the payers name.

From Joe Marchbein, CPA, Huber, Ring, Helm & Co., P.C., St. Louis, MO