Alternative to Innocent Spouse or Offer In Compromise

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Subject Author Date Alternative to Innocent Spouse or Offer In Compromise John D. Goulden 09-28-2007  Re: Alternative to Innocent Spouse or Offer In Com... Harlan Lunsford 09-29-2007  Re: Alternative to Innocent Spouse or Offer In Com... Mark Bole 09-30-2007  Re: Alternative to Innocent Spouse or Offer In Com... Taxmanhog 10-01-2007  Re: Alternative to Innocent Spouse or Offer In Com... Benjamin Yazersky CPA 10-01-2007  Re: Alternative to Innocent Spouse or Offer In Com... Phil Marti 10-02-2007  Re: Alternative to Innocent Spouse or Offer In Com... Harlan Lunsford 10-02-2007
Posted by John D. Goulden on September 28, 2007, 3:59 pm Please log in for more thread options This situation: a married couple files joint returns for several years. Y works one job over those years and always had sufficient withholding to cover her share of their taxes. X, however, did not - he worked several different jobs and consistently (and deliberately, and over her protests) underwithheld on his W4 with each new job. As a result, they had federal tax due each year. They didn't pay it and built up a tax liability of 10K or so. They set up a payment plan and payed on it for a few years. Then X and Y divorced. Y continues to work her job and has her refunds confiscated because of their back taxes, which with penalties and interest now amount to nearly 20K. X has stopped paying on the tax debt (even though it's in their divorce decree that he must continue to do so) and doesn't seem to be very concerned about this problem. Y feels like she's paid her fair share of these taxes - she always had sufficient withholding and has even sacrificed 5K in refunds after their divorce (filing as HOH) to service this debt. However, because they had joint accounts and because she signed the forms (in other words, she KNEW he had a history of not paying their taxes) her application to be considered an innocent spouse was rejected. Does she have any options here, other than to appeal the innocent spouse ruling and try again? Will the IRS consider separating their joint tax liabilities into his-and-hers? She is just sick of having to carry a tax burden created by her ex's refusal to have sufficient withholding and by his refusal to actually send the IRS their balance due for those years. What about an Offer in Compromise? Of course it also makes her sick to shell out thousands on an OIC to pay taxes she feels she's already paid and that gets HIM off the hook as well. And X is pretty spotty on paying his child support, too, so even a few thousand dollars for an OIC is out of reach for her right now. Any suggestions - any at all - would be welcome. Disclaimer - I'm dating Y, we're considering marriage in a year or so, and I would hate to have to pay this off myself or have to file as an innocent spouse for the rest of my life. Not to mention the incredible amount of stress this puts on her. So I do have quite an interest in seeing this problem resolved. -- John D. Goulden << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Harlan Lunsford on September 29, 2007, 3:44 pm Please log in for more thread options John D. Goulden wrote: > This situation: a married couple files joint returns for > several years. Y works one job over those years and always > had sufficient withholding to cover her share of their > taxes. X, however, did not - he worked several different > jobs and consistently (and deliberately, and over her > protests) underwithheld on his W4 with each new job. As a > result, they had federal tax due each year. They didn't pay > it and built up a tax liability of 10K or so. They set up a > payment plan and payed on it for a few years. > > Then X and Y divorced. Y continues to work her job and has > her refunds confiscated because of their back taxes, which > with penalties and interest now amount to nearly 20K. X has > stopped paying on the tax debt (even though it's in their > divorce decree that he must continue to do so) and doesn't > seem to be very concerned about this problem. > > Y feels like she's paid her fair share of these taxes - she > always had sufficient withholding and has even sacrificed 5K > in refunds after their divorce (filing as HOH) to service > this debt. However, because they had joint accounts and > because she signed the forms (in other words, she KNEW he > had a history of not paying their taxes) her application to > be considered an innocent spouse was rejected. > > Does she have any options here, other than to appeal the > innocent spouse ruling and try again? Will the IRS consider > separating their joint tax liabilities into his-and-hers? > She is just sick of having to carry a tax burden created by > her ex's refusal to have sufficient withholding and by his > refusal to actually send the IRS their balance due for those > years. What about an Offer in Compromise? Of course it also > makes her sick to shell out thousands on an OIC to pay taxes > she feels she's already paid and that gets HIM off the hook > as well. And X is pretty spotty on paying his child support, > too, so even a few thousand dollars for an OIC is out of > reach for her right now. > > Any suggestions - any at all - would be welcome. > > Disclaimer - I'm dating Y, we're considering marriage in a > year or so, and I would hate to have to pay this off myself > or have to file as an innocent spouse for the rest of my > life. Not to mention the incredible amount of stress this > puts on her. So I do have quite an interest in seeing this > problem resolved. You pretty much understand what's happened and why, and raise an interesting issue as to separation of tax liabilities. This can be done in certain cases where the spouse truly is innocent. But her signing the joint returns at the time is not one of them. Sorry. Looks like after marriage, you should each file separate returns. ChEAr$, Harlan Lunsford, EA n LA << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Mark Bole on September 30, 2007, 12:28 am Please log in for more thread options John D. Goulden wrote: > This situation: a married couple files joint returns for > several years. Y works one job over those years and always > had sufficient withholding to cover her share of their > taxes. X, however, did not - he worked several different > jobs and consistently (and deliberately, and over her > protests) underwithheld on his W4 with each new job. As a > result, they had federal tax due each year. They didn't pay > it and built up a tax liability of 10K or so. They set up a > payment plan and payed on it for a few years. > > Then X and Y divorced. Y continues to work her job and has > her refunds confiscated because of their back taxes, which > with penalties and interest now amount to nearly 20K. X has > stopped paying on the tax debt (even though it's in their > divorce decree that he must continue to do so) and doesn't > seem to be very concerned about this problem. > > Y feels like she's paid her fair share of these taxes - she > always had sufficient withholding and has even sacrificed 5K > in refunds after their divorce (filing as HOH) to service > this debt. However, because they had joint accounts and > because she signed the forms (in other words, she KNEW he > had a history of not paying their taxes) her application to > be considered an innocent spouse was rejected. > > Does she have any options here, other than to appeal the > innocent spouse ruling and try again? Will the IRS consider > separating their joint tax liabilities into his-and-hers? > She is just sick of having to carry a tax burden created by > her ex's refusal to have sufficient withholding and by his > refusal to actually send the IRS their balance due for those > years. What about an Offer in Compromise? Of course it also > makes her sick to shell out thousands on an OIC to pay taxes > she feels she's already paid and that gets HIM off the hook > as well. And X is pretty spotty on paying his child support, > too, so even a few thousand dollars for an OIC is out of > reach for her right now. It sounds like there was only an underpayment of tax, not an understatement of tax. Therefore the only type of innocent spouse relief available is equitable relief, hopefully that is the type that was applied for. However since Y clearly knew about the underpayment and did nothing about it at the time, I can't see how she qualifies even for that -- perhaps if there was a domestic abuse situation? Whichever Circular 230 professional (EA, CPA, etc) who helped with this so far would be the best person to answer this question in detail -- it's not a self-help or Usenet-help situation, IMHO. Unfortunately her notion of wage withholding vs. "her share" of tax liability is completely at odds with how it actually works. If only she had started filing separately at the first sign of this trouble... Lastly, IANAL, but it seems there are so many government-assisted ways to collect on back child support, it's hard to understand why she hasn't pursued that more vigorously. -Mark Bole << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Taxmanhog on October 1, 2007, 6:32 am Please log in for more thread options >> John D. Goulden wrote: >> This situation: a married couple files joint returns for >> several years. ... >> snip a lot.... >> What about an Offer in Compromise? Of course it also >> makes her sick to shell out thousands on an OIC to pay taxes >> she feels she's already paid and that gets HIM off the hook >> as well. Not true, if she qualifies & succeeds in an OIC as a sole applicant, collection of the remaining debt will continue to be pursued from her EX until the statute expires. << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Benjamin Yazersky CPA on October 1, 2007, 6:32 am Please log in for more thread options > This situation: a married couple files joint returns for > several years. Y works one job over those years and always > had sufficient withholding to cover her share of their > taxes. X, however, did not - he worked several different > jobs and consistently (and deliberately, and over her > protests) underwithheld on his W4 with each new job. As a > result, they had federal tax due each year. They didn't pay > it and built up a tax liability of 10K or so. They set up a > payment plan and payed on it for a few years. > > Then X and Y divorced. Y continues to work her job and has > her refunds confiscated because of their back taxes, which > with penalties and interest now amount to nearly 20K. X has > stopped paying on the tax debt (even though it's in their > divorce decree that he must continue to do so) and doesn't > seem to be very concerned about this problem. > > Y feels like she's paid her fair share of these taxes - she > always had sufficient withholding and has even sacrificed 5K > in refunds after their divorce (filing as HOH) to service > this debt. However, because they had joint accounts and > because she signed the forms (in other words, she KNEW he > had a history of not paying their taxes) her application to > be considered an innocent spouse was rejected. > > Does she have any options here, other than to appeal the > innocent spouse ruling and try again? Will the IRS consider > separating their joint tax liabilities into his-and-hers? > She is just sick of having to carry a tax burden created by > her ex's refusal to have sufficient withholding and by his > refusal to actually send the IRS their balance due for those > years. What about an Offer in Compromise? Of course it also > makes her sick to shell out thousands on an OIC to pay taxes > she feels she's already paid and that gets HIM off the hook > as well. And X is pretty spotty on paying his child support, > too, so even a few thousand dollars for an OIC is out of > reach for her right now. > > Any suggestions - any at all - would be welcome. > > Disclaimer - I'm dating Y, we're considering marriage in a > year or so, and I would hate to have to pay this off myself > or have to file as an innocent spouse for the rest of my > life. Not to mention the incredible amount of stress this > puts on her. So I do have quite an interest in seeing this > problem resolved. If a joint return was filed for any particular year, the IRS can collect from either spouse on that tax return. Where the (ex) spouses disagree, they need to settle it between themselves. The innocent spouse won't work, because Y knew of the underwithholding & still signed the joint return. I don't see OIC being applicable either. There is no doubt that the tax liability exists. Y,s remedy is to collect from X. In your case, I'm afraid that will have to be in court. ___________________________________ <<< Benjamin Yazersky, CPA [NJ & NY] >>> -----> real address on hobokeni or hobokenx <----- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Similar Threads Posted offer in compromise April 24, 2009, 2:49 pm Offer in Compromise Question January 30, 2007, 5:18 pm IRS Offer In Compromise from Utah State November 28, 2006, 9:03 pm Offer-in-Compromise Excel template June 13, 2009, 11:52 am LLC and innocent spouse relief September 3, 2009, 11:08 am Alternative to IT'S DEDUCTIBLE May 21, 2009, 12:47 pm Highway Use Tax on Alternative Fuels January 18, 2008, 10:28 pm Any Alternative to stock "put" or "short against the box" June 23, 2006, 3:10 am House Interest - Alternative Minimum Tax July 25, 2009, 3:04 pm Any Way to Avoid Alternative Minimum Tax on Stock Options Exercised in 2008? 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