Question

Jasper and Crewella Dahvill were married in year 0. They filed joint tax returns in years 1 and 2. In year 3, their relationship was strained and Jasper insisted on filing a separate tax return. In year 4, the couple divorced. Both Jasper and Crewella filed single tax returns in year 4. In year 5, the IRS audited the couple’s joint year 2 tax return and each spouse’s separate year 3 tax returns. The IRS determined that the year 2 joint return and Crewella’s separate year 3 tax return understated Crewella’s self-employment income, causing the joint return year 2 tax liability to be understated by $12,700 and Crewella’s year 3 separate return tax liability to be understated by $7,350. The IRS also assessed penalties and interest on both of these tax returns. Try as it might, the IRS has not been able to locate Crewella, but they have been able to find Jasper. (Leave no cells blank - be certain to enter "0" wherever required.)

a. What amount of tax can the IRS require Jasper to pay for the Dahvill’s year 2 joint return?
Amount of Tax:__________________
b. What amount of tax can the IRS require Jasper to pay for Crewella’s year 3 separate tax return?
Amount of Tax:__________________

Answer 1

Answer: a. $12,700

b. $0

Step-by-step explanation:

a. As Jasper and Crewella Dahvill filed joint tax returns in Year 2, both of them are joint and severally liable for any errors that may arise in the filing. The IRS could not find Crewella but they could find Jasper and as he is liable as well, he will have to pay the full amount that Crewella understated their tax liability by.

b. In year 3, Jasper and Crewella Dahvill had a strained relationship and filed their returns separately. As a result Jasper is not liable for any errors that will arise from Crewella's tax returns filing including the understatement of tax liability.