This presentation explains how common law marriage or informal marriage affects filing status for Form 1040.

1. How Informal Marriage or
Common Law Marriage
Affects Filing Status
Alan D. Campbell
Troy University – Montgomery Campus

2. Form 1040
U.S. Individual Income Tax Return
• When a tax preparer
prepares a U.S.
individual income tax
return, the tax
preparer must
determine the proper
filing status
• There are five
possible filing
statuses

3. Five Possible Filing Statuses
• Single
• Married filing jointly
• Married filing
separately
• Widow(er) with
dependent child (also
known as surviving
spouse)
• Head of Household

4. Purpose of Paper
• To help tax preparers
determine the proper
filing status
• Especially for couples
who live together
• But have not been
formally married

5. Determining Marital Status
• State law determines
whether a couple is
legally married
• Texas recognizes
informal marriage
• The Texas Family
Code specifies the
requirements for an
informal marriage

6. Jurisdictions That Recognize
Common Law Marriage
• Alabama
• Colorado
• District of Columbia
• Georgia (if in existence
before 1-1-97)
• Idaho (if in existence before
1-1-96)
• Iowa
• Kansas
• Montana

7. Jurisdictions That Recognize
Common Law Marriage
• New Hampshire (for
inheritance purposes only)
• Ohio (if in existence before
10-10-91)
• Oklahoma (if in existence
before 11-1-98)
• Pennsylvania (if in existence
before 1-1-05)
• Rhode Island
• South Carolina
• Utah (if validated by court or
administrative order)

8. Statement No. 2 of the Statements
on Standards for Tax Services
• A CPA must make a
reasonable effort to
obtain all information
from the taxpayer to
answer the questions on
the return
• Questions include
requests for information
• CPA must obtain
information about filing
status

9. Statement No. 3 of the Statements
on Standards for Tax Services
A CPA must make
reasonable inquiries
of the taxpayer if the
information provided
by the taxpayer
appears to be
incorrect, incomplete,
or inconsistent with
other facts of which
the CPA is aware

10. Reg. §1.6694-1(e)(1)
States that any
income tax return
preparer must make
reasonable inquiries
of the taxpayer if the
information the
taxpayer provides the
preparer does not
appear to be correct
or complete

11. Penalty for Noncompliance
• For tax returns prepared
after May 27, 2007, if the
taxpayer’s tax liability is
understated
• The penalty is the greater
of
– $1,000 or
– 50 percent of the income
earned from preparing the
return (IRC §6694(a)(1))

12. Defenses Against the Penalty
• The preparer had a
reasonable belief that the
position taken on the return
was more likely than not to
be sustained on its merits
• The preparer adequately
disclosed the position on the
return (IRC §6694(a)(2))
• The preparer had
reasonable cause and acted
in good faith (IRC §6694(a)
(3))

13. Statement No. 8 of the Statements
on Standards for Tax Services
Requires a CPA to use
judgment to ensure that
tax advice
– Reflects professional
competence and
– Meets the client’s needs

14. If the Tax Preparer Determines that
the Taxpayer Is Married
• The tax preparer should
advise the taxpayer of the
advantages and
disadvantages of filing a
joint return or a separate
return
• The need for good advice
is even more important if
the marriage is in serious
trouble

15. If Married Couple in Texas
Files Separate Returns
• Couple must report
half of each spouse’s
income because
Texas is a community
property state
• Income from separate
property is generally
community income in
Texas

16. Exception 1
If the couple lived apart at
all times during the year,
they do not have to include
community income on a
separate return if
– at least one spouse has
earned income during the
year, which is community
income, and
– the spouse with the earned
income does not transfer any
of the earned income to the
other spouse (IRC §66(a))

17. Exception 2
A taxpayer does not have
to include community
income on a separate
return if
– the taxpayer had no reason
to know of the existence of
such income and
– including the community
income on a separate
return would not be fair
under all the facts and
circumstances
(IRC §66(c))

18. “Abandoned Spouse” May File
as Head of Household
• Legally married at the end
of the year
• Not legally separated
• Has a dependent child
• Has not lived with spouse at
any time during the last six
months of the year
(IRC §§2(c) and 7703(b))

19. Widow(er) with Dependent Child
• The taxpayer’s spouse
must have died in either
of the two preceding tax
years
• The taxpayer must have
a dependent child or
stepchild (IRC §2(a)(1))
and
• The taxpayer must not be
legally married at the end
of the tax year (IRC §2(a)
(2))

20. First Way to Prove
Informal Marriage in Texas
• File a declaration of
marriage
• Use form provided by the
Vital Statistics Unit of the
Texas Department of
State Health Services
• File at the county clerk’s
office
(Texas Family Code
§2.401(a)(1))

21. Requirements Before Filing
the Declaration
• Each must be at least 18 years
old (Texas Family Code
§2.401(c))
• Have agreed to be married, lived
together after the agreement
agreement, and held out as
husband and wife (Texas Family
Code §2.402(b)(5))
• Must not violate the law on
marrying certain relatives either
by whole or half blood or by
adoption (Texas Family Code
§2.402(b)(4))

22. Second Way to Prove
Informal Marriage in Texas
• Agree to be married (can be
inferred from cohabitation if they
hold out as husband and wife)
Russell v. Russell, 865 SW 2d 929
(Tex. 1993) and Gary v. Gary, 490
SW 2d 929 (Civ. App. Tex., 1973))
• Live together in Texas after such
agreement, and
• Represent themselves to others in
Texas as married (Texas Family
Code §2.401(a)(2))

23. Rebuttable Presumption That the
Couple Was Not Married
• The couple lived together
• Were never formally married
• Did not file a declaration of
marriage at the county clerk’s
office
• They have not lived together
for at least two years and
• Neither party has brought an
action for a property
settlement (Texas Family
Code §2.401(b))

24. Rebuttable Presumption Can Be
Overcome with Evidence
• If a couple met all the
requirements for an
informal marriage in
Texas and filed
income tax returns as
married taxpayers,
• The IRS would likely
treat them as married
taxpayers for those
years

25. Still Married for Tax Purposes
When Moving to a Different State
• If a couple has an informal
marriage in Texas
• The couple will still be
considered married for
federal income tax
purposes
• Even if the state where
they moved does not
recognize their informal
marriage or common law
marriage (Rev. Rul. 58-66)

26. Conclusion
• A tax preparer must
exercise due diligence in
determining the correct filing
status for a taxpayer
• Making the correct
determination is more
difficult if a couple lives
together without having
been formally married
• In such a case, the tax
preparer must determine if
the couple is legally married
under applicable state law

27. Conclusion
• A couple can prove an
informal marriage in Texas in
one of two ways
• A tax preparer who prepares
returns for couples who live
together but who have never
been formally married need
to study these provisions
carefully and make diligent
inquiries of the couple
• By doing so, the tax preparer
is much more likely to
determine the correct filing
status