Source: https://www.currentfederaltaxdevelopments.com/blog/2017/10/20/taxpayer-could-claim-earned-income-credit-but-apparently-not-for-reason-tax-court-gavetaxpayer-could-claim-earned-income-credit-but-apparently-not-for-reason-tax-court-gave
Timestamp: 2019-04-24 04:30:19+00:00

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There are some posts that bother me when I write them because Ithink there must be something I am missing. But I've tried to find that in this case and haven't, so I'll take the risk (and keep your eyes open for a correction if I've actually missed something).
A married taxpayer generally can only claim an earned income credit if the taxpayer files a joint return per IRC §32(d). As well, a taxpayer is not allowed to elect to file a joint return if the taxpayer has filed a separate return, has received a notice of deficiency and files a petition with the Tax Court per IRC §6013(b)(2)(B).
But what happens if the taxpayer in question had filed a return using a filing status other than married filing separately, in this case head of household? Per the Tax Court in the case of Knez v. Commissioner, TC Memo 2017-205 that return did not constitute a “separate return” for these purposes and, thus, Ms. Knez could elect to file a joint return with her husband even after she had filed a Tax Court petition.
In the end it appears the Tax Court got to a “kind of” proper result (allowing the earned income tax credit) but likely via the wrong route, at least based on the facts given.
The Tax Court had considered a similar issue just a few weeks before in the case of Camara v. Commissioner, 149 TC No. 13 following the results in a case written up on our website at the time it was issued (Ibrahim v. Commissioner, Docket No. 14-2070, reversing and remanding TC Memo 2014-8, 6/10/15). However, in that case the taxpayer in question had claimed single filing status on his return, a status that was not available to him because he was married at all times during the year in question.
The Tax Court concludes that Camara applies in this case, but does so by concluding that Ms. Kneze was not eligible to claim head of household status. The only problem with that statement is that it isn’t true.
such individual shall not be considered as married.
Petitioner and her husband, George L. Knez, were married throughout 2014.
They lived separately during that year, but they were not “legally separated * * * under a decree of divorce or of separate maintenance.” See sec. 7703(a)(2). Petitioner and her husband continued to live separately at the time she filed her 2014 Federal income tax return, but they reunited in July 2015.
This is important because the Court concludes no separate return was filed because the court “we followed appellate court opinions ruling that single returns and head-of-household returns erroneously filed by married taxpayers do not constitute “separate returns” within the meaning of section 6013(b)(1).” But this particular head of household return, unlike the one in Ibrahim case, was not erroneously filed—it was a perfectly allowable filing status for Ms. Knez to have elected. In Ibrahim the taxpayer had lived with his spouse for the entire year—a very key distinction.
So did electing to properly file head of household wipe out the earned income credit? While IRC §32(d) does talk about a taxpayer having to file a joint return if married, the provision specifically references IRC §7703 in determining if the taxpayer is married. And, as was noted above, IRC §7703 does not consider the individual married if the taxpayer lived apart from her spouse for last six months of the year and maintained a home for her child.
So where does that leave us with this case? Well, if a taxpayer who had lived with his/her spouse all year did file a head of household return, then they could change their status to married filing joint even after a Tax Court petition was filed under the holding of this case.
So how did this holding happen? Most likely because counsel did not represent the taxpayer, she never raised the defense that she was allowed to file head of household all along even though her husband had filed under a status he wasn’t eligible for.
The IRS also went down the wrong path, though this is a bit tougher to understand. No doubt the agent quickly determined these spouses were married, but the agent failed to consider whether one of the two individual returns filed might have been using an allowed status. Alternatively, it’s possible the agent was aware of information that the couple had lived together at some point during the last six months of the year (which would have invalidated her ability to claim head of household), but this data wasn’t communicated at the trial for whatever reason.
The judge might have noticed this problem, but frankly he decided the issue put before him by the parties as it was put before him. That basically is the job judges are called upon to do.
So, in any event, this case is a good reminder that it’s easy to overlook “simple” things because, frankly, the tax law is so complex it’s easy to get “detoured” into working hard on one issue that, actually, isn’t really the relevant one.

References: §32
 §6013
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 §32
 §7703
 §7703