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Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 2583
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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I currently live in California, am married and filed joint

Customer Question

Hello! I currently live in California, am married and filed joint tax return for 2015. I've been on disability with my company for the past two years and thus did not earn much income in 2015. Due to my disability, I didn't make payments on my student loan and it went into default. The student loan is my debt as it was all incurred before my marriage. We receive a a refund of $40k for 2015 due to lower income. I paid very little taxes in 2015 as my disability payments were taxable and I did not have taxes taken out of them. Therefore, If my husband and I had filed separately, the entire refund would have gone to him. I may very well have owed taxed if I filed separately, The entire tax refund went to pay off my student loan. We filed form 8379, injured spouse allocation. We anticipated getting the entire amount back because 1. the debt was mine prior to the marriage, and 2. the refund was due to taxes my husband had paid as I had paid very little. Unfortunately, we received a letter stating the injured spouse's portion of the joint overpayment is basically half. With that being said, is that calculation correct based on the information I provided? Would it make a difference if we refile separately?Thanks,
Rhonda
Submitted: 2 months ago.
Category: Finance
Expert:  emc011075 replied 2 months ago.

Hi, Ronda. My name is ***** ***** I will be happy to help you.

The injured spouse allocation is a request but it does not guarantee that the IRS will accept it as filed. Rarely the IRS allocates more than 1/2 of the refund to the injured spouse, regardless how much was withheld from whose paycheck. Special rules apply for community property states and certain government type of debt like child support, or student loans.

According to the IRS manual

"Withholding credits from community property income are community property and are allocated 50% to each spouse"

https://www.irs.gov/irm/part25/irm_25-018-005.html#d0e272

In situation like this it is better to file separate, even if you loose some credits or deductions. Unfortunately, once you filed a joint return, you cannot refile as separate. You cannot amend your filing status from filing jointly to filing separate.

Expert:  emc011075 replied 2 months ago.

I see you read my respond. Do you have any questions? Is there anything else I can help you with today?