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Merlo
Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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My fiance just got a letter from the IRS saying she owes over

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My fiance just got a letter from the IRS saying she owes over $220,000 in taxes form her ex-husband that goes back almost 18yrs ago. He filed bankruptcy and got out of it all. These taxes were from him they just pushed it over to her because they were married at the time. Any help or info would be greatly appriciated.
Submitted: 4 years ago.
Category: Tax
Expert:  Merlo replied 4 years ago.

Hello mark,

 

If your finance filed a joint return with her husband for the years that these taxes pertain to, then the IRS can hold either spouse responsible, regardless of which one of them is actually responsible for the taxes that are due.

 

Your finance can try a couple of things. The first thing she should do is file for Innocent Spouse Relief. Innocent Spouse Relief can be granted to a spouse who filed a joint return if the innocent spouse can show that she had no knowledge of the understatement or underpayment of the taxes in question. There is no guarantee the IRS will issue her relief under this provision, but this should certainly be your starting point.

 

If your finance does not qualify for Innocent Spouse Relief, then she work with the IRS on trying to reduce the amount that is actually owed. This is done by filing an Offer in Compromise in which she would basically present her full financial condition with a listing of her income and assets and her liabilities. If it appears to the IRS that they cannot possibly collect the entire amount due within the 10 years collection period they have to collect these taxes, then they may agree to settle with her for a lower amount.

 

The last option is to look and see when the statute of limitations runs out on the collection of this tax bill. By law, the IRS cannot continue collection efforts on tax bills more than 10 years from the date the taxes were finally assessed. You indicated that these taxes go back almost 18 years. That doesn't mean the taxes were last assessed 18 years ago ... that just indicates the year they pertain to. But it is a fair indication that since they are so old, it is very possible the 10 year statute may be running out soon. So you need to find out from the IRS the date that these taxes were finally assessed. The IRS only has 10 years from that date to collect this bill. If the statute is close to expiring, then your finance may be just as well off to wait this out if it's only another year or so, and after that time they can no longer pursue her for collection of this bill.

 

If this was helpful please press the Accept button.

 

Thank you mark

 

 

 

 

Customer: replied 4 years ago.

Merlo thanks, XXXXX XXXXX should not get married because this could carry over to me,correct? But as far as her financial situation is, she barley makes $500.00 a week and that goes to her car and other bills she has. She has no money or assets. Should I pay for a tax attorney. Or how can I find out when these were assessed. I just think the IRS is trying to get money any way they can since Obama has been in there maybe I am wrong. What about filing Bankruptcy, is that a good option?

Expert:  Merlo replied 4 years ago.

Hello again mark,

 

First, you need not let this stop you from getting married, at least from the standpoint of being concerned about your personal responsibility for this tax bill. You cannot be personally held responsible for any taxes owed by your wife that were from tax years prior to your marriage. The only time you become personally involved for her taxes are in years where you are married and file a joint return.

 

Now there is one point I would like to clarify. Even though the IRS could not come after you personally or any assets you own, once you do get married if your wife's name is XXXXX XXXXX a joint account owner on any bank account or if you add her name to the title of your home or car or any other assets, the IRS can place liens and or levies on those accounts and assets. So just be certain not to add her name to any assets you own, and you will not have any issues personally with the IRS over this debt.

 

I am not a huge fan of Obama's policies, but I do not think this particular situation is being driven by that cause. This is just typical IRS procedure that they have followed for many years. Once a tax bill becomes due from a married couple, they IRS will go after whichever spouse they feel they will get the money from the quickest. Once that spouse drops off from the possibility of collection, they will concentrate their efforts on the other spouse.

 

I would suggest that you begin by calling the IRS and asking them what the final date of assessment was on that tax bill. I must warn you that it is not always easy to get this information, and some IRS reps will go further in trying to help you than others. It shouldn't be that way, but unfortunately it is. If you have trouble obtaining that information in a relatively short period of time, I would suggest that you contact the Taxpayers Advocate Service in your area. This is a group of volunteers who help taxpayers weed through the red tape at the IRS when they cannot resolve an issue on their own. Here is a link to where you can contact your local advocates office.

 

http://www.irs.gov/advocate/content/0,,id=150972,00.html

 

Once you have that final assessment date, that will give you a better idea of where to start. Remember the IRS only has 10 years from the final date this tax was assessed to pursue collection. With the taxes being from 18 years ago, I cannot imagine there is much time left on the collection period, and if that ends up being the case, you may just want to wait this out. On the other hand if it ends up that they have another year or 2 or even longer left for the collection statute to expire, then you need to look at your other options.

 

Filing bankruptcy is certainly an option which would relieve her of this debt immediately, but only if certain conditions are met. The following five rules must be met in order for a tax bill to be dismissed through bankruptcy.

 

If the income tax debt meets all five of these rules, then the tax debt is dischargeable in Chapter 7 and Chapter 13 bankruptcy petitions.

  1. The due date for filing a tax return is at least three years ago.
  2. The tax return was filed at least two years ago.
  3. The tax assessment is at least 240 days old.
  4. The tax return was not fraudulent.
  5. The taxpayer is not guilty of tax evasion.

If your fiance's former husband qualified to have this debt discharged in bankruptcy court, then I have to believe she qualifies as well, as he would have had to meet the same rules. So filing bankruptcy would likely be a viable option which would end this nightmare for you if the bankruptcy is approved.

 

You can also try filing for the Innocent Spouse relief as suggested in my first post. That relief is requested by filing Form 8857 with the IRS.

 

Last but not least you certainly may want to get some outside help involved just to help you weed through the various paperwork and phone calls. However, rather than paying the high fees of a tax attorney, I would suggest that you contact an IRS Enrolled Agent for help with this problem. An EA is thoroughly experienced in tax law and is authorized by the IRS to represent taxpayers on all tax matters, and may even represent them in tax court the same as an attorney. They are just as knowledgeable as tax attorneys, but I think you should find their fees to be much more reasonable. So if you decide to get outside help, I would suggest contacting an EA in your area. I am giving you a link to the Natl Assoc of Enrolled Agents. On the left hand side of the page there is a link where you can find an EA in your area.

 

http://www.naea.org/memberportal/Resources/ForTaxpayers/whatis_EA.htm

 

If this was helpful please press the Accept button. It is the only way we receive any credit for helping with these questions.

 

Thank you mark, and I do wish you the best of luck in getting this resolved.

 

 

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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Merlo
Merlo
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25+ years tax consulting. Specializing in returns for US citizens living abroad