Tax Return Rejected by the IRS

I sent my 1040 tax return with my wife's W7 application (she is looking for her ITIN as she can't work at US due to visa regulations) about 1.5 months ago. Just now I received a letter from IRS saying that they rejected the tax return because either I or she didn't sign the 1040 or she was not listed on the 1040. As I filed the tax as "Married Filed Separately" and in the bottom part of the 1040 shows specifically that only BOTH should be signed if file "Married Filed Jointly". So that's why I didn't let her sign on my 1040. She signed her application of W7 which I included with my 1040.
So I am now basically confused what did I do wrong here? Does it mean that filing separately still be treated as 'jointly'? When I called their number the lady didn't understand initially and asked me to list her name and re-send everything. When I specifically read the rejection letter to her and asked her to check on this by the 'case reference number' she refused to do so and hung up on me. But she basically said completely different procedure such as "You need to send your 1040 and her W7 separately, and not together. If you send again everything together they are gonna reject it again." Now everywhere I read about getting an ITIN for spouse it says that I have to put everything together. This is where I'm lost as well.
Anybody has any idea how to deal with this? Thanks in advance!

Did you name her on the 1040, anywhere, and if so, what line(s) did you place her name? If you listed her on the lines not numbered at the beginning where you listed your name, address, and SSN, they apparently presume it was supposed to be a joint return since it says to name your spouse, if a joint return.

Form W-7 will only be processed in connection with the filing of a tax return. If your spouse is not filing a tax return the IRS will not process the W-7 form. The MFS filing status indicates that she is not filing a tax return. Now, the 1040 does ask for your spouse's name and SS#. Your spouse does not have a SS#, so this should be left blank and you should include an explanatory statement with your 1040. If you ever decide to file jointly, then the IRS will process the W-7 and assign her an ITIN.

Thanks! No, her name was not listed on 1040. But I called them again yesterday and this woman who picked up the phone checked my personal tax-file on them and said that I should have filed jointly. Then I said that to do that turbo-tax requires her SSN or ITIN which I don't have. She said to just make up one number and then download and erase that number before sending them the new tax return. I'm working on that now (unless you guys have other suggestions) but got into another situation. The Ohio state tax status says it's still under review and I guess if I change the filing status now (MFS to MFJ) then how to amend OH state tax return? I tried turbotax yesterday but efiling was not successful because the system said that it already has processed state return with my SSN. So any idea how to amend the state tax return or it would be automatically updated when I send my new federal tax return?

No, the federal filing will not change the state return. If you file jointly and send the W-7, wait until the IRS sends you the ITIN number and then amend your Ohio state return (if they accept it) or file it at that time if it has not been accepted.

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atanu;699102]Thanks! No, her name was not listed on 1040.

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then why would you include anything such as the W7 for her?

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But I called them again yesterday and this woman who picked up the phone checked my personal tax-file on them and said that I should have filed jointly.

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That is a choice to be made between the possible joint filers. You never have to file jointly, even if you are able to file that way.

Alright. I called IRS several times and eventually a live person pulled my file and basically told me that there are 2 wrong things on my tax return. (1) I should be filing married file jointly (MFJ) and NOT separately, and (2) she needs to sign on the return as it's gonna be 'joint' filing. Also they need her original passport along with her W7 application and NOT certified copies of her passport what I sent them before. So I re-did all the tax return with new joint filing status (MFJ), signed and sent the original passport by overnight express USPS certified mail. Now, just today I saw that I received only $1091 as tax-refund and NOT what I expected ($2461) and had on my 1040. I did some google-search and realize that IRS will send me an explanatory letter for this 'corrected' amount?
I have a concern that it could be their mistake. Because even with married file separately (MFS) status I had higher amount of tax refund (~$1600). Now, unless Turbo-tax did something wrong should I just go ahead and protest/disagree with IRS?
I just need your opinion what you think and am NOT asking to review my tax-return.

If you are married you can file married filing jointly or married filing separately. It is not the right of the IRS to require you choose either particular one of those two.

If you do not include her on your tax filing, there is no reason to include anything regarding her.

I don't understand how you would expect a return of more if filing married, separate. You do not have her as a deduction and you do not benefit from the tax rate beneficial to MFJ. Something in your scenario just doesn't make sense. I suggest taking it to a tax pro who can actually review the entire return to determine what you are getting such wildly different return amounts.

Thanks but are you saying if I file jointly I won't expect more than if I filed separately? I'm not expert in this and I could be wrong but I thought if somebody files jointly (MFJ) then he/she would receive more refund than if he/she would have filed as MFS.
If there is no benefit of getting extra refund then what's the scenario of MFS versus MFJ? Which one we should chose and on what basis?
I didn't do any tax calculations etc., everything was done by Turbo-tax with the information from my 2 W2s.

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Quoting atanu

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Thanks but are you saying if I file jointly I won't expect more than if I filed separately? I'm not expert in this and I could be wrong but I thought if somebody files jointly (MFJ) then he/she would receive more refund than if he/she would have filed as MFS.
If there is no benefit of getting extra refund then what's the scenario of MFS versus MFJ? Which one we should chose and on what basis?
I didn't do any tax calculations etc., everything was done by Turbo-tax with the information from my 2 W2s.

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Ok, you are getting confused so I am going to recap everything.

You have two choices how to file. Married filing jointly (requiring an ITIN application for your wife) or married filing separate (requiring no ITIN application for your wife but requiring you to put her name on your return and to include a statement explaining that she has no tax identification letter because she is not a US citizen or green card holder). The IRS cannot tell you that you made a mistake in filing married filing separately.

Your refund should not be smaller if you are filing a joint return, unless you are including tax credits that are not available to ITIN holders. However since no one here can see your return, you really should consult with a tax professional to see what the problem might be. You need to do this quickly because if that is the problem and you want to amend your return to married filing separately, you only have until April 15th to do so.

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Quoting atanu

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Thanks but are you saying if I file jointly I won't expect more than if I filed separately? I'm not expert in this and I could be wrong but I thought if somebody files jointly (MFJ) then he/she would receive more refund than if he/she would have filed as MFS.
If there is no benefit of getting extra refund then what's the scenario of MFS versus MFJ? Which one we should chose and on what basis?
I didn't do any tax calculations etc., everything was done by Turbo-tax with the information from my 2 W2s.

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but you said you filed married, separate and it was calculated your return was much greater than either MFJ (per the IRS) or MFS per Turbotax. I was asking why you expected more money when filing separate than if you had filed joint where the tax rate is better for MFJ.


If there is this much discrepancy, I suggest you review your information on Turbotax. I suspect you made an error somewhere.

Okay, sorry for late reply! Thanks for your responses earlier.
I did not calculate if MFJ would give me more refund but I just guessed that joint return may be more. So forget that part, it was just based on my assumptions.
Now, I corrected the mistakes. It's not the software. When I submitted MFS, I did not include her signature on the form, only mine was there but I claimed both of us together, unknowingly (or maybe some mistake in software entry). So they primarily gave me much less money based on that return and asked me if I have any question on their calculations. So I called IRS again and told them that I don't agree with their calculations. They explained things as I just said above. Then based on their suggestions I sent them another return with both of our signatures and this time MFJ using turbotax. IRS suggested me that I should leave the entry of her ITIN blank as they will assign her the number internally and process that. I received her ITIN last week by mail and checked the status of the new tax return (MFJ) that's showing me 'it's being processed'. By the way, the MFJ refund was about $1000 more than my MFS.

Don't forget to amend your Ohio return to "MFJ" now that you have her ITIN.