As a Chapter 7 Trustee, I consistently encounter questions involving the allocation of tax refunds between a spouse who filed Chapter 7, and one who didn't, where a joint return is filed. My interpretation of the law is pretty simple: the source of the refund will be excess withholdings. The refund should therefore be pro-rated based upon the percentage of withholdings attributable to each spouse. If a spouse does not pay anything in, he or she is not entitled to the refund.
So what does this say to the spouse who does not work outside the home, but nevertheless provides a valuable contribution? Not much, I'm afraid, except that neither the law nor the life guarantees a result that is altogether fair to every one all the time
The basis of my position is Gordon v. United States, 757 F.2d 1157, 1160 (11th Cir. 1985). Gordon is, admittedly, a tax case. The court reasoned that the question of "who owns what" part of a tax refund depends upon who paid in what withholdings. "Where spouses claim a refund under a joint return, the refund is divided between the spouses, with each receiving a percentage of the refund equivalent to his or her proportion of the withheld tax payments. See, e.g., Rosen v. United States, 397 F. Supp. 342 (E.D.Pa.1975); United States v. Mooney, 400 F. Supp. 98 (N.D.Tex.1975)."
The issue has also been addressed in a bankruptcy context in the Middle District of Florida, where the court held:
"The filing of a joint tax return does not affect the underlying property interests of the parties. U.S. v. Elam, 112 F.3d 1036, 1038 (9th Cir. 1997). Spouses filing a joint return have separate interests in any overpayment, the interest of each depending upon his or her income, i.e., an overpayment is apportionable to a spouse to the extent that he or she contributed to the overpaid tax." Rosen v. United States, 397 F. Supp. 342, 343 (E.D. Pa. 1975). See also Gordon v. United States, 757 F.2d 1157, 1160 (11th Cir. 1985) ("Where spouses claim a refund under a joint return, the refund is divided between the spouses, with each receiving a percentage of the refund equivalent to his or her proportion of the withheld tax payments."); Gens v. United States, 230 Ct. Cl. 42, 673 F.2d 366, 368 (Ct. Cl. 1982), cert. denied, 459 U.S. 906, 74 L. Ed. 2d 167, 103 S. Ct. 209 (1982), and reh'g denied, 459 U.S. 1081, 74 L. Ed. 2d 642, 103 S. Ct. 503 (1981) (holding that Wife was not entitled to any part of the overpayment for failure of proof that she paid any part of it). Claimant's interest in the refund check therefore equals the amount which she contributed to the 1991 income taxes."
In re Jones, 219 B.R. 631, 635 (Bankr. M.D.Fla. 1998).
So back to my simple formula: ownership of tax refunds directly correlates to the amount contributed to withholdings by each taxpayer. This position does strike me as wholly consistent with the rationale of the court in Gordon.
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