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
310-581-2900
888-987-1040jdemetriou@taxrepair.com
http://taxrepair.com
