Bug associated with muting players on your friends list

Me and my wife play in the same room as eachother on XBOX ONE X. When I mute her, I am unable to party chat with her and join her party in game. I'm not sure how the game handles muting other players, but there is something that needs to be updated there. If I unmute her I am able to join her party, but then I have to mute her again. It's very annoying.

It's a known issue. For some reason muting someone automatically blacklists them in the game.