Health Care Reform Carves Out New Filing Status Exception

Post Date: 4/4/14
Last Updated: 4/4/14


Cross References
- Notice 2014-23

IRC section 7703(a) states that marital status is determined as of the last day of the tax year. Unless there is a legal separation through a decree of divorce or separate maintenance, a married individual is considered married regardless of the circumstances that caused the separation. There is only one exception to this rule found in IRC section 7703(b). If a married individual files a separate return, maintains a home that is the principal residence of a qualified child for more than half the year, pays over half the cost of maintaining the home, and lived apart from his or her spouse for the last six months of the year, the taxpayer can be treated as unmarried under the Head of Household rules.

Author's Comment: We are not aware of any circumstance, other than the Head of Household provisions, that allow a married individual to file as unmarried. For example, a spouse with no qualifying child who has been abandoned for years with no way of contacting his or her spouse would be required to file Married Filing Separate if he or she were not legally separated under some court order. Likewise, a victim of domestic violence who does not want his or her spouse to know his or her location to file a joint return would be faced with having to file as Married Filing Separate.

Premium tax credit. Beginning in 2014, eligible individuals who purchase coverage under a qualified health plan through an Affordable Insurance Exchange are allowed a premium tax credit under IRC section 36B if all of the following are true:
- Household income is between 100% and 400% of the federal poverty level for the taxpayer’s family size,
- The individual may not be claimed as a dependent by another taxpayer, and
- If the individual is married, the individual files a joint tax return with his or her spouse.

New exception to the married filing status rules. IRS Notice 2014-23 acknowledges that victims of domestic abuse may not want to contact a spouse for purposes of filing a joint return. There could be risk of injury or trauma, or the abusing spouse may be subject to a restraining order which would legally prohibit contact. This notice also acknowledges that IRC section 7703(b) does not apply to victims of domestic abuse if they do not otherwise qualify to file as unmarried under the Head of Household rules.

As a result, the IRS has ruled that for calendar year 2014, a married taxpayer will satisfy the joint filing requirement for purposes of the premium tax credit if the taxpayer files a 2014 tax return using Married Filing Separate status if the taxpayer:
- Is living apart from the individual’s spouse at the time the taxpayer files his or her tax return,
- Is unable to file a joint return because the taxpayer is a victim of domestic abuse, and
- Indicates on his or her 2014 income tax return that the taxpayer meets the criteria under the above two points.

Author's Comment: There are numerous other provisions in the tax code that penalize a spouse who is the victim of domestic violence and thus unable to file a joint return. For example, the spouse forced to file Married Filing Separate does not qualify for the American Opportunity Credit, the Lifetime Learning Credit, or the Tuition and Fees Deduction, all of which are tax provisions that could help a victim of domestic violence gain his or her independence from the abusing spouse.
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