TAP 04-046

Married Filing Separate Income Reporting

Statement of Issue:

A married taxpayer who file separately every year is likely to receive an IRS notice that information is missing from the individual tax returns when income to which both spouses are legally entitled (such as interest from a joint bank account) has been allocated to the return of the other spouse. Even if the allocation is proper, IRS inquiry will be triggered if information reporting attributes the income to the other spouse because that is the primary social security number on the account.

Proposal:

1. With the greater use of computers and the reporting by all banks and other institutions of income to IRS, taxpayers should be on notice that IRS properly accounts for all income and income taxes. IRS should inform taxpayers that the IRS matches the Social Security Number used by the bank or other institution to report the income to the Social Security Number on the return. To help taxpayers and avoid correspondence, IRS should print this information in the instructions for the Forms 1040A and 1040. IRS should include a warning that not listing the income under the social security number that is used on the reporting forms may trigger an inquiry from IRS.
2. There are a number of non-governmental publications used by many taxpayers. IRS informally, through National Communications and Liaison and Stakeholder Partnerships, Education, and Communication should respectfully recommend the publications contain warnings to taxpayers about this potential problem

This suggestion was to include a warning in the Instructions for Forms 1040 and 1040A for married taxpayers who file separate returns that not listing income under the social security number that is used on the reporting forms may trigger an inquiry from the IRS. The suggestion also recommends that the IRS informally should recommend adding this warning to non-governmental publications. We are not adopting this suggestion for the following reasons.

We currently have a section in the Instructions for Forms 1040 and 1040A entitled Do Both the Name and SSN on Your Tax Forms Agree with Your Social Security Card. This section is listed under General Information, and informs taxpayers that if his or her Form W-2, Form 1099, or other tax document shows an incorrect SSN or name, to notify the employer or form-issuing agent as soon as possible to make sure that the earnings are credited to the proper social security record. Also, by law, taxpayers are required to properly report their own income on their individual tax return. This is reflected in the line 3 instructions for Forms 1040 and 1040A. Including a warning for married taxpayers who file separate returns that not listing income under the social security number that is used on the reporting forms may result in an inquiry from the IRS may result in the improper reporting of such income.