Wednesday, April 23, 2014

My Husband Did WHAT with the IRS?

If your spouse ran up a huge tax debt without you knowing it, you may be protected

Linda is separated from her husband.  All of her mail isn’t even being forwarded yet.  Yesterday when she went to pick up their son,  she noticed that right on the top of the pile of mail were two letters from the IRS.  One was addressed to her and the other to her husband, Tom.  She opened hers, and Linda’s eye’s double in size at what she saw.  The IRS was trying to collect $175,000.

Linda was in shock.  As she read the notice of possible lien on their property, she began to sense that this wasn’t the first notice about the issue.  In fact, there was even more than one tax year in question.  Her heart began to race. How would she confront her husband about this, especially since he had apparently been withholding even her mail?

Linda worked as a nurse for the local hospital and earned a good income of $77,000.  Her income tax was deducted from her wages.  Tom was in business for himself and had some good years and some bad years.  He would say, if asked, that he was making low six figures.  So their lifestyle was like that of a couple making $200,000.
When Tom realized he was caught, he told her everything at the first sitting.  This was not all they owed.  The IRS had not yet started collection on the last year that they filed.  The final amount was going to be much higher Linda, already feeling marital stress because of Tom’s controlling and overbearing manner, did not want to pay for his old tax debt! In the strictest interpretation of the tax code, Linda was on the hook for all of the tax debt. 

In fact, if Tom stopped working and had no income, she would be responsible to pay the entire amount.  She and Tom had signed each tax return jointly and by doing so she had taken on the liability for the entire tax.  She had not waited for Tom to fill in the final amounts of tax owed on the returns, and had no idea that he had not paid all taxes. She owes the tax, feels it is wrong, but is it?

Linda might fit under the Innocent Spouse provision of the tax code
and that code has become more helpful to some spouses due to changes in the IRS approach on these matters.

According to a recent Forbes article:
Internal Revenue Code Section 6015 authorizes the IRS to grant a spouse relief from a joint return, where it is inequitable to hold the spouse bound for the return. In Revenue Procedure 2003-61, the IRS set forth the following eight factors to be weighed in deciding requests for innocent spouse relief:
Marital status. Whether the spouse requesting relief from the joint income tax return (“requesting spouse”) is separated or divorced from the nonrequesting spouse.
Economic hardship. Whether the requesting spouse would suffer economic hardship if the Service does not grant relief from the income tax liability.
Knowledge or reason to know. Whether the requesting spouse had knowledge or reason to know that the nonrequesting spouse would not pay income tax liability properly reported on the joint income tax return (underpayment case), or of a deficiency of tax in the joint tax return (deficiency case). A tax deficiency generally results from under-reporting of gross income or over-reporting of deductions.
Nonrequesting spouse’s legal obligation. Whether the nonrequesting spouse has a legal obligation to pay the outstanding income tax liability pursuant to a divorce decree or agreement. This factor will not weigh in favor of relief if the requesting spouse knew or had reason to know, when entering into the divorce decree or agreement, that the non-requesting spouse would not pay the income tax liability.
Significant benefit. Whether the requesting spouse received significant benefit (beyond normal support) from the unpaid income tax liability or item giving rise to the deficiency.
Compliance with income tax laws. Whether the requesting spouse has made a good faith effort to comply with income tax laws in the taxable years following the taxable year or years to which the request for relief relates.
Abuse. Whether the nonrequesting spouse abused the requesting spouse.
Mental or physical health. Whether the requesting spouse was in poor mental or physical health on the date the requesting spouse signed the joint income tax return or at the time the requesting spouse requested relief from that return.
If you owe the IRS more than $20,000 for any reason, including the situation outlined above, we may be able to help you avoid all liability, reduce what you owe, or help you to work out an affordable payment plan with the IRS.  As you can see from the above, the rules are very complex.  You will benefit from having a team of highly experienced tax professionals helping you work things out.

Call us now for a no cost, no obligation, initial consultation with Jim Demetriou or Mike Montano personally. 888-987-1040

Contact Us

Demetriou, Montano & Associates - Tax Resolution Specialists

12301 Wilshire Blvd. Suite 318
West Los Angeles, CA 90025


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