Question: -- 10/7/2002
I have been separated from my husband since 2000. The divorce is still pending. He owes over $100K in 941 taxes. He just received a dischrage of all debts except this in a Ch 7 Bankruptcy. He has supposely made an OIC - I am trying to get a copy of his Form 656. I have a federal Thrift Saving Plan and some equity in the house titled in my name only. I in no way profitted from his non payment of these taxes) I have an autistic son and have almost no money left to pay for his therapy. My question: if his OIC is rejected, could my house and TSP be seized?
Answer: Probably not. You did not say that you were liable on the payroll taxes; that's good. If you were, then the house is at some risk, as is the TSP. The one caveat is that the law has changed regarding VOLUNTARY sales of the home. In such a case, the IRS would be entitled to your H's net proceeds, up to the amount of the taxes. Also, it is unlikely that the IRS would press you heavily for this debt, even if you owed it, due to your son's medical condition.
Question: -- 10/3/2002
If a non-custodial parent has a signed 8332 for a designated year, but for some reason chose not to claim the child anyway, can he refile and claim the dependent at a later date?
Answer: Yes, by amending your return, if within the period of limitations, normally three years from the earlier return or two years from date of payment, whichever is later.
Question: -- 09/30/2002
My problem is my husband has offered to take over the remaining irs taxes of 18k for tax year 2001, as part of the divorce settlement. Next, he will claim me as a dependent for next tax season as well, which means another 20-30K. Half mine. How could I go about, or is it possible, for my name to be removed from the IRS connected to him. I am afraid my refund will be taken from me for a very long time, even if he is paying. He is a business owner, and does not set aside taxes for these purposes. I realize I may not file taxes on my own until 2004, and I will be looking at a refund plus EIC.
Answer: Sounds like you filed jointly for 2001, and if so, this makes the liability both yours and H's. For 2002, you have a choice to file jointly if married, or married filing separately, in which case you will be liable only for taxes on your own return. Claiming you as a dependent requires that you fulfill the dependent exemption requirements (see prior columns and questions).
Question: -- 09/25/2002
I am concerned about my husband's gambling and am considering asking for his equity in the house (it's sizable) in lieu of alimony (which would also be fairly sizeable and long term after 24 years of marriage). How is this handled regarding taxes? How is the idea best sold to him so it has the tax advantages to him that alimony would have?
Answer: The house can't be "alimony" since it is not a cash payment (a requirement for alimony treatment). Alimony treatment would likely be a disaster anyway since alimony is taxable to the receipient (you), in which case you would not have the cash to pay the tax. It's also deductible by the payor, a deduction so large he probably could not use it all.
Non-cash property transfers such as the house are handled under Section 1041 of the Internal Revenue Code. Generally, this provides for tax-deferred transfers. So if you get the house, it's tax-deferred, but you take the former tax basis.
Question: -- 09/9/2002
My husband and I have been separated since Jan 1996. We used to own a business. He failed to pay 941 taxes, so they hit us with a lien for $30,000.00. Since then we filed bankruptcy on the business and personal. The only thing still unresolved is the IRS debt. He makes 70,000.00 a year and I only make approx 22,000.00 a year and I have and claim both our children. We filed jointly since 1996 to 1999. In 2000 and 2001 I finally filed separately and between both years my tax return = approximately $9500.00. The IRS has kept that return to be applied to the debt. Then I contacted the IRS and they say that I owe $49,000.00 and he only owes $40,000.00. Something is incorrect and I thought that they were going to take that original debt
of $30,000.00 and make me responsible for 1/2 and him responisble for the other 1/2. I don't know what to do and I am afraid to contact them with out legal advice, because I do not want them to take what little money I have in my bank to raise my family. HELP!!
Answer: First find out what you really owe. Call 1-800-829-1040 and get a "literal transcript." That will tell you what you owe, for what periods, and what was seized to pay it.
Next, ask the IRS for help in filing an "injured spouse" claim. This will help if you are not liable for the 941 taxes, but if you are, you should consider filing an offer in compromise. The IRS has representatives who will guide you through the process. With an income of 22K, the IRS will likely help you along.
Question: -- 09/9/2002
My wife and I have 50/50 custody of her son from a prior marriage. Her ex-husband wants to claim the son on his taxes. Can we and her ex both claim him as a dependent 50% each? or is it all or nothing?
Answer: It's all or nothing - but for each tax year at a time. Use Form 8332 if you want to "alternate." Also, see my prior columns for a discussion of this rule.
Question: -- 08/29/2002
My divorce was finalized several weeks ago. I am trying to figure out how to proceed with obtaining the 401K funds I am entitled to from my ex-husband's account. Today is the first time I have ever even heard of a QDRO. He had a lawyer, I did not. Was this deliberately not mentioned to be so that I would not be able to claim the money? What do I need to do?
Answer: Get a lawyer. After that, consider going back to court to amend the decree to incorporate a Qualified Domestic Relations Order (QDRO. My prior columns have discussed this issue.
Question: -- 08/28/2002
My husband and I have been separated since 4/13/02. He owns two businesses. He has filed two extensions for tax year 2001. He now says that I must pay half the bookkeeper's fee in order to release all the business information in order to file taxes. He wouldn't get her the books until 4/02, so she is behind. I believe getting the books in order to prepare taxes is a business expense. I'm already paying him spousal support and have primary custody of our child. I have no problem paying the accountant half his fee in order to complete the taxes, but as far as his business books are concerned isn't this a business expense?
Answer: Certainly seems that way. The expense is one thing; the tax benefit of paying it is another. If it's a proprietorship, or a corporation, or a partnership, the outcome could change.
Question: -- 08/22/2002
My husband and I will be starting the process of divorce soon. When is the best time, for tax purposes, to finalize the divorce?
Answer: The main dividing line is December 31. If you want to file jointly for the year of the divorce, you need to be married on December 31. Other than that, sometimes when property is divided (e.g., a house), the date of transfer affects who gets the deductions for mortgage interest, real estate taxes.
Question: -- 08/14/2002
Husband & I are getting ready to separate. We have been married 14 years in CA. We have always filed a joint tax return & received a refund. This year will be different though, as we sold our home in March & are renting. Our CPA told us we probably will have to pay about $3,000 in tax for 2002. Also, now just learned my husband has been working a "side job" and will receive a 1099 for this extra "non taxed" income (pretty substantial). Will we just file invidiual & am I responsible for his taxes on 1099 income?
Answer: Yes, if you file jointly. No, if you file separately.
Question: -- 08/13/2002
I have been divorced since 1987 and custody for my two children. The court ordered that the father of my children is allowed to claim my daughter now 16 years old and I can claim my son 19 years old. My son finished High School this year and joines the AirForce on Oct.1 of this year. Now I do not have a child to claim on my taxes anymore nad my ex-husband is not willing to give up the rights to claim my daughter. When I called the IRS I was advise that I hade now choice exceot getting an Attorney to fight in court over this matter. Since Iam a single parent I am not able to afford an Attorney at this time. Could you please advise, what my rights are, I have signed a form in 1987 that my ex-husband is allowed to claim my daughter on his taxes. Is there another way to change this, without getting an attorney involved.
Thank you for your help.
Answer: Possibly. Check the form you signed. Was it forever? or alternate years? Check the details. Beyond that, if you can't afford an attorney, try calling the local or state bar association. They often have very reduced or no-charge attorneys available, especially for domestic situations. Keep trying. You'll find one.
Question: -- 08/12/2002
I am the custodial parent of my two children, and my divorce papers mentions nothing regarding who gets the right to claim them. My ex-husband pays child support, but by no means is it near half of the cost of raising them or supporting them.
He states he will claim the exemptions by filing his tax return first in 2003 (before I file mine). I have not and will not sign Form 8332, so what will happen to him or me when he files? If he files first will I get to claim the exemptions for my kids? Will the IRS notify him or me? And how long will that take? Will it affect my refund amount if he files first? He keeps saying that the law will be on his side because he pays child support, and that I will be in trouble if I try to claim the kids after he has already filed with them on his. What should I do?
Answer: You are entitled to the exemption on these facts. Section 151(e) of the Internal Revenue Code specifically addresses the issue of exemption in the case of divorced or separated parents. Essentially, it says that the "custodial" parent gets the exemption unless the parents sign Form 8332 or equivalent.
Entitlement to the exemption is NOT decided by a race to file. So his filing first does not mean he gets the exemption. If he files first, and then you file claiming the kids, the IRS will spot this and issue a notice to you (and him). At that point you have an IRS dispute. It's best to consider resolving this before everyone gets into a paper war with the IRS.
Question: -- 07/31/2002
My ex-husband and I have joint custody,in the year 2000 when we seperated I claimed my son,and now the courts states that we switch years even years for me and odd years for him. I just found out that he also claimed him in the year 2000. Should I report him, so it does not come back to haunt me? Also can I claim more then him because I have my son everyday, we just have equal overnights?
Answer: You can claim your son if you were entitled to do so. However, in such cases you should use Form 8332, the "official" IRS form that allocates the exemption. Failure to use that form or its equivalent entitles the IRS to make a determination of who gets the exemption. The normal (default) rule is the exemption goes to the custodial parent.
Question: -- 07/30/2002
Within a few weeks, I'll be marrying a Canadian citizen, who will then be living and able to work in the US. I've been trying to decide the best way to file taxes for 2002 (which will be done in 2003). I've read the IRS publications (was that fun) and found it very confusing, to say the least. Unless you can offer clarifying guidelines, perhaps it'd be best to find an accountant knowledgeable in US/Canadian tax issues. Thanks for your input!
Answer: Many US accountants have knowledge of foreign laws, but some accountants specialize in it. Ask your own cpa, and if he or she is not sufficiently familiar with foreign tax aspects, ask for a referral (at least for this issue).
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