151.10 New York State personal income tax returns of husband and wife.

(a) Separate Federal income tax returns. If a husband and wife file separate Federal income tax returns, they must also file separate New York State personal income tax returns on separate forms. For this purpose, they must use form IT-201 or form IT-203, whichever is applicable, and their tax liabilities shall be separate.

(b) Joint Federal income tax returns.

(1) General. The Federal rules for determining whether a husband and wife qualify for filing a joint Federal income tax return also apply for New York State personal income tax purposes. However, where a change of residence occurs during the taxable year, see Part 154 of this Article. If a husband and wife (other than a husband and wife described in subdivision [c] of this section) file a joint Federal income tax return, or if neither spouse files a Federal income tax return, they may either:

(i) file a joint New York State personal income tax return (on form IT-200, IT-201 or IT-203), even though one spouse has no income, in which event their income tax liabilities will be joint and several and each will be liable for the entire income tax on such joint return, except as provided in subdivision (e) of this section and subsection (e) of section 685 of the Tax Law; or

(ii) elect to file separate New York State personal income tax returns, provided they do so on a single form IT-201 or IT-203 and comply with the requirements of the Tax Commission relative to the determination of their separate income taxes on such single form. In this event, their income tax liabilities will be separate, except as provided in subdivision (d) of this section.

(2) For purposes of tax computation only, the Internal Revenue Code permits the Federal income tax to be determined on a joint Federal income tax return as though the taxable income reported on such return were split equally between husband and wife and the income tax computed separately on each half. Since article 22 of the New York State Tax Law does not include a similar provision, a husband and wife are not permitted to determine their New York State personal income tax on either joint or separate New York State personal income tax returns on the basis of splitting their combined income.

(c) Husband and wife with different resident status.

(1) If either the husband or wife is a resident and the other is a nonresident of New York State, they must file separate New York State personal income tax returns on separate form IT-201 or IT-203, regardless of whether they file a joint or separate Federal income tax return, unless both elect to file a joint New York State resident personal income tax return in which their joint New York taxable income is determined as if both were residents. They may elect to do this only if they meet the following requirements:

(i) they filed a joint Federal income tax return for the same taxable year; and

(ii) each spouse maintained his or her status as a resident or nonresident during the entire taxable year. If they file such a joint New York State resident personal income tax return, their income tax liabilities will be joint and several, except as provided in subdivision (e) of this section and in subsection (e) of section 685 of the Tax Law. If they file separate New York State personal income tax returns, their income tax liabilities will be separate.

(2) If, for Federal income tax purposes, a joint Federal income tax return cannot be made because either the husband or wife, at any time during the taxable year, was a nonresident alien, it follows that in accordance with subparagraph (1)(i) of this subdivision, a joint New York State personal income tax return cannot be filed in such a case.

(d) Separate New York State personal income tax returns filed on a single form; application of payments; refunds. If a husband and wife file separate New York State personal income tax returns on a single form pursuant to subparagraph (b)(1)(ii) of this section, any excess payment by either spouse (including withheld and estimated income taxes) may be applied against any balance of income tax due from the other spouse, and refund of any excess not so applied may be made payable to both spouses or, if either is deceased, to the executor or administrator for the estate of the decedent or to the surviving spouse, as the case may be (see subsection [d] of section 686 of the Tax Law). However, the provisions of this subdivision will not apply if such return of either spouse includes a demand that any overpayment made by him or her be applied only on account of his or her separate liability.

(e) Relief of spouse from New York State personal income tax liability on joint New York State personal income tax returns.

(1) If a joint New York State personal income tax return has been filed pursuant to the provisions of subdivision (b) or (c) of this section for a taxable year, and on such return there is a substantial understatement of New York State personal income tax attributable to grossly erroneous items of one spouse, the other spouse will be relieved of liability for New York State personal income tax (including interest, penalties and other amounts) for such taxable year to the extent that such liability is attributable to such substantial understatement of New York State personal income tax attributable to grossly erroneous items if:

(i) the other spouse establishes that, in signing such return, he or she did not know, and had no reason to know, that there was such substantial understatement; and

(ii) taking into account all the facts and circumstances, including whether or not the other spouse benefited directly or indirectly from the grossly erroneous items, it is inequitable to hold the other spouse liable for the deficiency in New York State personal income tax for such taxable year attributable to such substantial understatement.

(2) A spouse may make application for the relief provided for in this subdivision by filing with the Tax Commission a sworn statement stating all the facts and circumstances set forth in subparagraphs (1)(i)-(ii) of this subdivision in support of such application. The Tax Commission may request additional sworn statements, testimony under oath or any other proof that it requires to determine whether the applicant should be relieved of liability for New York State personal income tax as provided for in this subdivision.

(3) For the purposes of this subdivision:

(i) the term grossly erroneous items means, with respect to any spouse, any item of New York adjusted gross income attributable to such spouse which is omitted from New York adjusted gross income and any claim of a New York deduction, exemption, credit or basis by such spouse in an amount for which there is no basis in fact or law;

(ii) the term substantial understatement means the excess of the amount of the New York State personal income tax required to be shown on the New York State personal income tax return for the taxable year, over the amount of New York State personal income tax imposed which is shown on the New York State personal income tax return, reduced by any rebate (within the meaning of section 681[g] of the Tax Law), which exceeds $100; and

(iii) the determination of the spouse to whom items of New York adjusted gross income (other than New York adjusted gross income from property) are attributable will be made without regard to community property laws.

(4) New York State personal income tax liability attributable to substantial understatement must exceed specified percentage of innocent spouse New York adjusted gross income.

(i) Except as provided in subparagraph (iii) of this paragraph, the provisions of this subdivision shall apply:

(a) if the innocent spouse's New York adjusted gross income for the most recent taxable year ending before the date the deficiency notice is mailed is $20,000 or less, only if the liability for New York State personal income tax described in paragraph (1) of this subdivision (including interest, penalties and other amounts) attributable to the substantial understatement is greater than 10 percent of such New York adjusted gross income;

(b) if the innocent spouse's New York adjusted gross income for the most recent taxable year ending before the date the deficiency notice is mailed is more than $20,000, only if the liability for New York State personal income tax described in paragraph (1) of this subdivision (including interest, penalties and other amounts) attributable to the substantial understatement is greater than 25 percent of such New York adjusted gross income.

(ii) For purposes of this paragraph, if the innocent spouse is married to another spouse at the close of such year, the spouse's New York adjusted gross income must include the New York adjusted gross income of the new spouse, whether or not they file a joint New York State personal income tax return.

(iii) Exception. The requirement contained in this paragraph that New York State personal income tax liability (including interest, penalties and other amounts) attributable to substantial understatement must exceed either 10 percent of the innocent spouse's New York State adjusted gross income if such spouse's adjusted gross income for the most recent taxable year ending before the deficiency notice is mailed is $20,000 or less; or 25 percent of the innocent spouse's New York State adjusted gross income if such spouse's adjusted gross income for the most recent taxable year ending before the deficiency notice is mailed is more than $20,000, shall not apply to a substantial understatement attributable to an omission from New York adjusted gross income. Therefore, these relief of spouse provisions will be available without the need to meet the applicable percentage limitation specified in this paragraph where there is a substantial understatement attributable to an omission from New York adjusted gross income.

(5) If a joint New York State personal income tax return has been made by a husband and wife for a taxable year and on such return there is a substantial understatement of tax attributable to grossly erroneous items of one spouse, and if, pursuant to the provisions of this subdivision, the other spouse is relieved of liability for New York State personal income tax (including interest, penalties and other amounts) for such taxable year to the extent that such liability is attributable to such substantial understatement, and if a joint New York City personal income tax return or a joint City of Yonkers income tax surcharge return is made by the spouse for the same taxable year, then such other spouse shall be relieved of liability for the New York City personal income tax or the City of Yonkers income tax surcharge, whichever is applicable, for the taxable year to the extent that such liability is attributable to such substantial understatement.

(f) Notwithstanding any provision of this Subchapter to the contrary, if a husband and wife file a joint New York State personal income tax return, any excess payment and interest thereon by either spouse may be applied against any past-due support or against any amount of a default in repayment of a guaranteed student, State University or city university loan attributable to the other spouse, of which the Department of Taxation and Finance has been notified pursuant to the provisions of section 171-c, 171-d or 171-e of the Tax Law. In calculating the amount of excess payment and interest thereon which may be applied against past-due support or against a default in repayment of a guaranteed student, State University or city university loan of a spouse, the excess payment will first be applied against any liability of such spouse in respect of any tax imposed by or pursuant to the authority of the Tax Law or administered by the Department of Taxation and Finance and against estimated tax for the succeeding taxable year if the taxpayer claims such overpayment or a portion thereof as a credit against estimated tax for such succeeding taxable year. However, the provisions of this subdivision will not apply to the excess payment of a spouse if such spouse affixes to the joint New York State personal income tax return a written demand providing that any overpayment made by him or her be applied only on account of his or her separate liability and furnishes such other information as the Tax Department may deem necessary and prescribe by forms and instructions. (See form IT-280, Nonobligated Spouse Allocation. ) A spouse may not file an amended New York State personal income tax return to make such a demand. If a spouse makes a demand that any overpayment made by him or her be applied only on account of his or her separate liability, then:

(1) amounts attributable to withholding from wages of such spouse will be applied only against the separate liability of such spouse;

(2) amounts attributable to separate payments of estimated income tax by such spouse will be applied only against the separate New York State personal income tax liability of such spouse; and

(3) amounts attributable to joint payments of estimated income tax and amounts attributable to any other payment will be applied against the separate New York State personal income tax liability of each spouse in such proportion as is agreed upon by both spouses; provided, however, that in the absence of any such agreement, such amounts will be applied against the separate New York State personal income tax liability of each spouse in the same proportion which the separate New York State personal income tax liability of each spouse bears to the total New York State personal income tax liability of both spouses. In the absence of an agreement between spouses, the amounts of joint estimated income tax payments and other payments will be apportioned based upon the following formula: separate New York State personal income tax liability of spouse / total New York State personal income tax liability of both spouses × amount of estimated income tax payments For purposes of this subdivision, the separate New York State personal income tax liability of each spouse will be determined by the following formula: New York adjusted gross income of each spouse / combined New York adjusted gross income of both spouses × total New York State personal income tax liability of both spouses Assume that for the calendar year 1987, H had New York State personal income tax withheld from his wages in the amount of $600. W, his spouse, received no income during the year. Additionally, H and W made joint payments of estimated income tax totaling $900. H and W subsequently filed a joint New York State personal income tax return showing a New York State personal income tax liability of $1,300. W had defaulted in repayment of a guaranteed student loan in the amount of $300 and the Department of Taxation and Finance was so notified in accordance with the provisions of section 171-d of the Tax Law. H did not affix to their joint New York State personal income tax return a written demand providing that any overpayment made by him be applied only on account of his separate New York State personal income tax liability. The overpayment of H and W in the amount of $200 ($1,500 less $1,300) will be applied against W's liability for her defaulted student loan. Since the amount owed on the defaulted student loan exceeded the amount of the overpayment, neither H nor W will receive any refund of New York State personal income tax. Assume that for the calendar year 1987, H had New York adjusted gross income of $20,000 and had New York State personal income tax withheld from his wages in the amount of $1,600. W, his spouse, had New York adjusted gross income of $5,000 and had New York State personal income tax withheld from her wages in the amount of $500. Additionally, H and W made joint payments of estimated tax totaling $200. H and W filed a joint New York State personal income tax return showing a combined New York adjusted gross income of $25,000 and a total New York State income tax liability of $836. H had defaulted in repayment of a guaranteed student loan in the amount of $1,200 and the Department of Taxation and Finance was so notified in accordance with the provision of section 171-d of the Tax Law. W affixed to their joint New York State personal income tax return a written demand providing that any overpayment made by her be applied only on account of her separate New York State income tax liability. The overpayments made by each spouse will be treated as follows: