Academic journal article Journal of Accountancy

How to Apply Joint Estimated Tax Payments When Filing Separately: A Straightforward Answer to a Thorny Question

Academic journal article Journal of Accountancy

How to Apply Joint Estimated Tax Payments When Filing Separately: A Straightforward Answer to a Thorny Question

Article excerpt

A married couple who has filed jointly in the past and made joint estimated income tax payments for the current tax year may decide to file separately for that year. This could arise, for example, with a couple who was separated by the end of the tax year but had no legal separation agreement or divorce decree at that time. (Such an agreement or decree would allow only for filing single, not married filing separately). With so many married clients moving toward divorce, the question of how to allocate the joint payments can come up again and again; CPAs are well-advised to know the answer.

ALLOCATION RULES

The question is how to allocate the joint estimated tax payments between spouses. The answer is in regulations section 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. However, if the spouses do not agree to a division, the payments are to be allocated to each of them in the ratio of each spouse's separate tax to the aggregate tax imposed.

Example 1. Husband H's 2004 tax bill, using married filing separately filing status, is $16,000; wife W's 2004 tax bill, using the same filing status, is $24,000. Their total 2004 estimated tax payments were made married filing jointly and totaled $22,000. They agree to divide the payments evenly. Thus, H and W can each apply $11,000 of the payments to their 2004 tax bills.

Example 2. The facts are the same as in Example 1, except that H and W do not agree on an allocation ratio. …

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