Greetings,
You are right to be concerned about this scheme.
You are not personally liable at all for the tax debt of a spouse when filing separately; but the collection and enforcement action could lead to his assets (and his half of jointly owned assets) being encumbered or even seized at some point.
There are also possible civil penalties and interest on unpaid taxes that would indirectly affect your financial position and even possible criminal penalties if prosecuted.
The following discussion is from a site dedicated to exposing such schemes:
http://quatloos.com/Q-Forum/viewtopic.php?f=8&t=5016
Included in that discussion is the Department of Justice press release as seen at http://www.justice.gov/opa/pr/2009/October/09-tax-1161.html including links to the press releases of jail sentences for some of those involved in that particular scheme.
The "redemption" or "OID redemption" scheme is not new or magical; but has seen some recent insurgence.
I hope this helps for your husband to at least try to ask about this activity and see the potential danger to him and your family. You may want to privately discuss with a criminal attorney any possible connection that might be alleged by a prosecutor that you had to the activity .
Best wishes.
I found the same information online myself. These people (Creditors in Commerce) are aware of the "alerts" put out by the FBI, the IRS, the DOJ and the Dept. of Treasury. They tell their clients not to pay attention to them. They point out that in the warnings posted by these agencies, filing the 1099-OIDs is referred to as a "scheme," and not as a "scam." They define scheme as "an elaborate and systematic plan of action," which is not illegal.
These people consider themselves "sovereign." They are creditors who live on the "private" side of life vs. the "public" side; therefore they say public laws don't apply to them. They love to argue their cases in court. They boast of their knowledge of "contracts." They hold workshops during which they role play court scenes with their clients to show them how to handle themselves in a courtroom.
I think the only evidence that will convince my husband is if I can find documentation of the prosecution of someone using the 1099-OID scheme who was claiming to be a "creditor" with "sovereignty." Do you know where I might find that information?
Hello again,
With enough time and effort we could probably find a similar case; but I doubt we will find that is of any real help.
From my experience with those enamored in a tax scheme, our efforts to find a case would simply be met with a response that the individuals that lost that case did not do everything just right or did not have the right "program".
This is the same reason they have given when "They say only people who make errors on their tax returns have problems with the IRS."
No matter what you provide they will say to ignore it just like the alerts from the governmental agencies.
Public laws do apply to everyone. This claim alone should send flags up.
You said: "They love to argue their cases in court."
My suggestion would be to put the burden of proof on them and to make them provide cases that are verifiable (such as via docket numbers) where their scheme has worked.
My prediction is that they will not be able to provide any actual victories in court.
Sorry to say that I do not have a tool to get your spouse to see the danger in imagining that laws do not apply to him.
You may want to use the discussion forum at quatloos.com site to ask about (and refute) details you know of this scheme or for help in tracking any cases the do provide as a claimed win.
You are right to only file married separately. You need to consider how to protect your assets, such as retitling to only your name.
My prayers and hopes are with you as you work, and may have to struggle, to get your husband out of this.
Enrolled Agent
I have prepared individual, trust, partnership, and corporate taxes since 1987.