I am looking for help with a situation that has resulted from taxes
my wife owed before we were married. First, some background because this is rather complicated. We live in California
and were married almost three years ago. She owes the IRS
approx. $25k and California about $5k. She was on disability
when I met her. That ended shortly after we were married and she hasn't had a job since we've been together. She did sell cosmetics on one of those multi-level programs for a while, and using her SSN to get set up with that company led the state
to find our joint checking account. This caused my wife to have to agree to pay them $110 per month.
She filed an offer in compromise with the IRS about nine months before we were married. The IRS took about a year and a half to get back to her, then declined the offer using totally erroneous information regarding her income
. She wrote them a letter to correct it and that didn't get anywhere, either.
I filed as a single filer the last two years so the IRS/state wouldn't take my refund to cover her old debts. Now she is going to be filing bankruptcy
soon re these debts and also some credit
card debt from when she was single. (I know this isn't a huge tax debt, but her credit is bad anyway and any new loans we get are in my name only.) I'm planning
to file a married filing jointly return
because if I do married filing separately
I have taxes due as well as AMT. If I do MFJ, I get a pretty large refund instead and no AMT. This puts me back in the situation, however, of being worried about the IRS/state taking my refund to cover her old debt. I don't think the IRS should benefit
by their sloppiness and inaction regarding her OIC. I feel very strongly about that. If they had acted promptly and competently, this could have been resolved a long time ago and we wouldn't be resorting to filing BK. I found an "injured spouse" form
that I can file that should at least get some of my refund to me. California, however, doesn't have an injured spouse provision.
My wifes father had bought her a car that was in his name. It had a high interest rate
so I refinanced it about six months ago, but I stupidly put my wife's name on the title along with mine. I just wasn't thinking about the tax situation when I did that. We have about $8,000 equity in the car (which is worth about $18,000) so I am concerned about the IRS/state putting a lein on the car, but not sure what to do about it other than sell it, which I'd prefer not to do. I'm concerned that if I closed the account with the $110 monthly debit, the state might do some searching and find her name on the car.
So I have a few questions:
1. What is the best approach for me to take to get my tax refund this year? I'd prefer not to file as single this year because 1) it's not the right way to handle it, and 2) I'm concerned that with the upcoming BK filing it will create problems. I think she will have to put her married name on the BK filing and acknowledge that she's married. But it seems filing MFJ will cause some or all of my refund to be withheld. I don't want this to happen, especially since she is going to be filing BK. I've thought about filing for an extension
and letting the BK happen before I file my tax return, but the IRS/state may require that she files a tax return as part of the BK process so they can see if she has any income/taxes due for 2004 - I don't know. This is confusing to me and I'd really appreciate some advice on how to handle it.
2. Is there anything I can do re having my wife's name on the car title besides selling the car? I know we can just re-title it and take her name off, but I've heard that this can look shady and create problems.
3. Should I file amended returns
for the past two years to change my filing status to MFJ or MFS? I know I would probably get more money back if I did that, but again I don't want the IRS/state to get it and I also don't want to raise any red flags. Another alternative
is to wait until after the BK to file the amended returns, but again there is the red flag issue - both on the tax side and the BK side.