This was originally published on September 24th, 2010.
CCA 201035023 highlights one of the problems that arises from routinely filing joint returns and then shifting to a separate return. The IRS received Form 4868 (Extension request) from a couple along with a payment. The couple did not, however, file a joint return. Therefore the payments were allocated in accordance with regulation 1.6654-2(e)(5). Please be patient here. Readers of this blog number in the scores and not all of them have memorized the regulations - yet. The payment was therefore apportioned based on the taxpayers gross tax liability. When husband got wind of this he requested that the portion applied to wife be allocated to him since he was the source of the funds for the payment. He cited the MacPhail case (96 AFTR 2d 2005-6066).
The IRS noted that the MacPhail case concerned a refund not the application of an estimated payment. (In MacPhail all payments on a return were made by wife's family partnership. The business that the husband and wife ran together produced only losses.) So they are sticking with the application of the extension payment.
It's not unusual for the need to make estimated or extension payments to be generated more by one member of the couple than the other. I have a mythical couple called Robin and Terry who's function is to help me with awkward pronoun problems. For purposes of this discussion Robin is a partner in a law firm and Terry is an employee of a high tech company. Robin gets a monthly draw of 6% of total guaranteed pay and quarterly draw payments of 7%. The latter are used to make estimated tax payments. Terry of course has withholding. If things ever get rocky for this couple Robin could be in a tricky position. Terry's withholding is Terry's, but absent an agreement Terry would be entitled to a share of Robin's estimated tax payments.
It's not unusual for family businesses or trusts to make estimated tax payments for beneficiaries or family owners. Controllers or trustees charged with that responsibility would be prudent to make those payments as individual, not joint, estimated tax payments. Whoever was making the payments on behalf of Sarah Crane (Angus MacPhail's ex-spouse) probably wishes they had followed that course.