LOUISIANA LEGAL SERVICES AND PRO BONO DESK MANUAL 2013

TAX LAW
If a joint return was filed and both spouses had income and tax payments on
the return, the non-liable spouse may request her portion of the tax refund by filing
a Form 8379. Residents of community property states may apply for injured
spouse relief if they were not required to pay the past due amount that was offset
by the IRS at the request of a qualified creditor. Overpayments are allocated
according to state law in community property states.
9.3 MARITAL DISPUTES OVER TAX REFUNDS
Ownership of tax refunds is governed by state law. 143 In community property
states, division of a tax refund may require an analysis of the community and separate
nature of the underlying income earned. In Louisiana, the classification of
property as community or separate is fixed at the time of acquisition. 144 By comparison,
ownership of the stimulus refund payments may be owned 50-50 and not
depend on the parties’ respective incomes. 145
For most low-income taxpayers, the Earned Income Credit accounts for most
of their tax refund. Federal law deems the Earned Income Credit tax refund to be
the separate property of the spouse who was entitled to this tax refund–even in
community property states. 146 Thus, the other spouse does not have a community
property claim for any portion of the Earned Income Credit. Furthermore, onetime
tax refunds are not “income” for the purposes of La. R.S. 9: 315 child support
calculations. 147
9.4 TAX LIABILITY IN COMMUNITY PROPERTY STATES
9.4.1 Income Tax in Community Property States
What are a spouse’s tax liabilities after separation, but before divorce?
If separate tax returns are filed by a married couple in a community property
state, each spouse must report one-half of the community income. 148 The higher
income spouse will want this community property law to apply, whereas the lower
income spouse will want to argue that an exception to this rule exists. In a community
property state, each spouse should be limited to 50% of any cancellation
of debt income claimed by the IRS. 149
The Internal Revenue Code § 66 establishes 4 exceptions to the rule that a
spouse has to report one-half of community income:
(1) The spouses lived apart for the entire year, filed separate returns and did not
transfer more than a de minimis amount of earned income between them. 150
143 See e.g., Rev. Rul. 2004-72, I.R.B. 2004-30; Rev. Rul. 74-611, 1974-2 C.B. 399; see also Gray v. United States, 553 F.3d
410 (5 th Cir. 2008)(analysis of interest in tax refund under Texas community property laws). Note that the allocation
of tax refunds in non-community property may involve an analysis of the spouse’s earnings, payments and separate
tax liabilities. See e.g., I.R.M. 25.18.5.3; Rev. Rul. 80-7, 1980-1 C.B. 296; In re Palmer, 449 B.R. 621 (Bankr. D. Mont.
2011).
144 Robinson v. Robinson, 778 So.2d 1105 (La. 2001).
145 See e.g., In re Thompson, 396 B.R. 5 (Bankr. N.D. Ind. 2008).
146 Rev. Rul. 87-52, 1987-1 C.B. 347.
147 La. R.S. 9: 315 (C)(3)(a).
148 United States v. Mitchell, 403 U.S. 190, 196-97 (1971); Reg. § 1.66-1.
149 Cf. Brickman v. Comm’r, T.C. Memo 1998-340.
150 I.R.C. § 66(a); Reg. § 1.66-2. I.R.C. § 66(a) relief is automatic if the requirements are met. For purposes of § 66 (a),
any amount of income transferred for the benefit of the spouses’ child is not treated as a transfer to the spouse. Reg.
§ 1.66-2(c).
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