In the case of Karen and Bill, which principle best explains their joint liability for tax issues?

The principle that best explains Karen and Bill's joint liability for tax issues is joint and several liability. This concept means that when a couple files a joint tax return, they are both individually responsible for the entire tax liability. If the IRS determines that they owe taxes, it can hold either spouse liable for the full amount, regardless of who earned the income or who incurred the tax liability. This principle is significant because it emphasizes that both parties are legally responsible for any tax obligations that may arise from their joint return, which can lead to serious implications if one spouse fails to meet their tax obligations.

In contrast, other concepts like innocent spouse relief provide a potential avenue for one spouse to be relieved of responsibility under specific circumstances if they can demonstrate that they were unaware of the tax issues caused by the other spouse. Tax deferral refers to postponing tax payments to a future date, and tax avoidance involves strategies to minimize taxes legally, neither of which capture the essence of their joint liability in this context.