A couple facing marital problems agreed to file a joint return claiming exemptions for their children, the child tax credit and an earned income credit then separated shortly after. The agreement between the two was that their tax refund would be shared equally. But the husband got greedy and kept it all, thus irritating his wife (and rightfully so). In fact, she was so upset that she went ahead and filed a married-filing-separately return by the April 15th deadline. Because of her filing, the IRS audited his return and changed his status to married filing separate as well. His new filing status resulted in a disallowed earned income tax credit. Additionally the service gave his dependency exemptions to the wife because her income was higher than his. As a result, he lost the child tax credit as well. The Tax Court said the the IRS’ changes to his return were correct (Kososki, TC Summ. Op. 2014-28) because she timely filed her return. Marital disputes are rarely a pretty sight and can become very costly when the Tax Court gets involved.
Stephen Osborne, CPA