Separate Spousal Tax Liability for Missouri Income Taxes

If a married couple files a joint federal income tax return, both spouses are jointly and severally liable for the full amount of federal income tax liability for that tax year. Joint and several liability means the Internal Revenue Service can collect the full amount of income tax from either or both spouses, regardless of whether the income tax liability is attributable to the separate income of only one spouse.  A divorce does not prevent the IRS from collecting the entire unpaid income tax liability from either of the spouses.  Under certain circumstances, a spouse may obtain relief from joint and several tax liability by timely filing Form 8857 and proving a claim for innocent spouse relief, separate liability or equitable relief.

By contrast, a married taxpayer who files a combined Missouri income tax return is liable only for the amount of Missouri income tax liability attributable to his or her own income. A taxpayer’s  separate income includes his or her earned income such as wages, income from his or her own separately owned property, and his or her portion of income from jointly owned property, such as interest from a jointly owned financial account.

Missouri law requires a married couple who files a joint federal income tax return to file a combined Missouri income return.  The income of each spouse is reported separately on the combined return. The Missouri tax due on each spouse’s income is separately determined and then added together and reported on the return.

However, in assessing unpaid income tax liability, the Missouri Department of Revenue does not track which spouse’s income gave rise to the liability. Instead, in practice the Missouri Department of Revenue assesses the entire income tax liability against each spouse, even if the tax liability is only attributable to the income of one spouse.

To obtain separate income tax liability, an individual who filed a combined Missouri tax return must notify the Missouri of Revenue in writing that he or she is only liable for the income tax liability on his or her income per Missouri law and set forth the portion, if any, of the income tax liability that is attributable to his or her separate income.

The following is an example that illustrates the separate Missouri income tax liability of a couple who filed a joint federal income tax return:

Individuals A and B, a married couple, filed a joint federal income tax return and report their income separately when filing their Missouri combined return. All of A’s income for the tax year was from wages she earned and all of her Missouri income tax liability was paid by withholding payments. All of B’s income was attributable to a sole proprietorship business that he conducted. On audit, B is determined to have erroneously taken certain deductions on his business income and underreported business income, resulting in a tax deficiency and interest of $48,000. The Missouri Department of Revenue assesses the entire income tax liability of $48,000 against both A and B who are now divorced, even though under Missouri law A is not responsible for any of the income tax liability.

In order for A to prevent the collection of the assessed income tax liability from her, A would need to contact the Missouri Department of Revenue in writing and explain that all of the assessed income tax liability is attributable to the income of B, and as a result she is not liable for any of the assessed tax liability as provided by Missouri Statute section 143.491. This statute provides that the tax liability of a couple who files a combined Missouri return shall be separate and not joint and several.

Unfortunately, many Missouri taxpayers who file a combined return are unaware of Missouri’s separate income tax liability law or believe that the Missouri Department of Revenue has discretion whether to grant such separate tax liability. As a result, such taxpayers unwittingly end up paying income tax for which they are not liable.

Posted by Attorney Marcia S. Orgill. Orgill concentrates her practice in the area of business and personal taxation—especially complex domestic and international tax strategies.