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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4037
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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My husband and I own a small business together.

Resolved Question:

My husband and I own a small business together. He cheats with his Accountant on taxes (they mess with the income/deduction until they get the numbers they like on a return). I hate this and have begged him to be forthright and legal but to no avail. I want to file seperately, but we are in Calif. I have no clue to what the true income is or what the deductions are because I have not stepped foot in our business for over three years...I would have to go by what he says which I do not trust. Do I have to file at all? Can he just do the whole thing himself as Married filing Seperate?

Thank you
Submitted: 2 years ago.
Category: Tax
Expert:  Stephen G. replied 2 years ago.

Stephen E. Grizey :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.

Stephen E. Grizey :

There is no good answer to your dilemma.

Stephen E. Grizey :

However, the only thing you can do is refuse to sign the tax return. If you do not have any other income, there would be nothing else for you to file.

Stephen E. Grizey :

If you sign a return that you know to be fraudulent, you are as guilty as your husband.

Stephen E. Grizey :

If this is your only income, ie. this small business, you have benefited from the business in terms of providing your living expenses and whatever else. Chances are if you refuse to sign the return, you husband will forge your signature & sign your name, & file the return anyway.

Stephen E. Grizey :

I guess in your situation the question is are you able to stand up to your husband without assuming an unacceptable risk.

Stephen E. Grizey :

Do you have any idea as to how much he is understating your income?

Customer:

No clue how much he is understating as far as income...and no clue to how much he is fudging deductions. I told the Accountant that I do not want to sign the return. She said that we would have to file seperate, but how do I know how much to put as my "half" since I do not know what the truth is? Can he just file by himself?...we have no other income. We rent, and have no property. The benefits I receive are that we have basic living expenses paid through the business...beyond that, he invested all the extra money he makes into commodities.

Customer:

Why are you stepping out of our chat before I have answered your question? Are you coming back?

Stephen E. Grizey :

I'm here

Stephen E. Grizey :

When there's no response after a couple of minutes I move on & come back when you respond.

Stephen E. Grizey :

So, am I understanding that your husband controls the checkbook, in essence the business?

Customer:

Can he just file "Married filing Seperate" and I not file at all? Would I have to sign his return? Can I stand up to him...yes, but the only way to do that is by not filing with him...he simply cannot be trusted at this point. He does as he pleases.

Customer:

Yes. He control absolutely everything there. I do not even go there because I have no say in what he does or how he does it.

Stephen E. Grizey :

Do you know what credentials his accountant has, ie. CPA, enrolled agent, etc.

Customer:

Enrolled Agent

Stephen E. Grizey :

What type of business is it?

Customer:

Jewelery...we buy gold and silver and sell jewelry...do repairs ect. So I know he makes a ton of money and then turns around and stockpiles it. But our tax return last year was a joke...we paid nothing when we grossed over $300k.

Customer:

Do I have to file too if there is no other income than this business?

Stephen E. Grizey :

Well, she is risking her right to practice before the IRS by agreeing to "massage" the figures with your husband. Perhaps it would be a good time to remind her of that. Without suggesting that you actually take any specific action, just for your own knowledge, if you were to inform the IRS as to what she is doing, you could bring her a "world of hurt", along of course with yourself in terms of the additional taxes that would be due.

Stephen E. Grizey :

As far as you filing, no, not if your husband is responsible for the business; however is it a sole proprietorship under his name and S-Corporation or what?

Stephen E. Grizey :

should be name or not name and in last line above

Customer:

The reason I do not want to file with him is because we have only been married 5 years and I have just became aware of their massaging practices. I hate being put in the postition of having to pay back taxes and penalties for their collusions in the past.

Customer:

The business is sole proprioter with me added on as "et all". We are married, so it is not a partnership.

Stephen E. Grizey :

I agree with you 100%. Particularly if you just became aware of it, now is the time to take a stand; for your own protection. How did you find out?

Customer:

I had myself added to the business four years ago because he borrowed 100k and it was the only way I could be sure he would have to pay me back (which he never did). So I felt as long as I had my foot in the door, he would have to pay something if we divorced...which we are seriously considering now.

Stephen E. Grizey :

Well, it doesn't work that way; if all of the income (if any) is reported under your husband's social security number, it is being reported as his "sole proprietorship". A SOLE proprietorship is just that, one person.

Customer:

I did not "find out"...I basically figured it out by looking at 2009 tax returns when they were sent to us.

Stephen E. Grizey :

Husbands & wives can in fact have partnerships.

Customer:

Well, then maybe we are labeled as partners then...see the level of my ignorance.

Customer:

The accountant uses both of our ssn

Stephen E. Grizey :

There would be a partnership return then on Form 1065; don't know how she is using both ss#s, unless she is splitting the so called income 50/50 and filling out two separate self-employment schedules, ie. 2 Form SEs.

Stephen E. Grizey :

Did you both start the business together or was it his business before you were married?

Customer:

No she is not splitting the income and there are not two separate self-employment schedules. Our sellers permit simply says my husband's name, ET AL. It was his before we were married.

Customer:

He added me on a year later...I suppose as husband/wife partners.

Stephen E. Grizey :

Well, you add another dimension when you mention divorce. As I'm sure you know CA is a community property state; that has important implications in terms of businesses each spouse may have had before marriage; if you are seriously considering divorce, you need to consultant an attorney sooner rather than later; hopefully, reconciliation is a possibility; in any event, I would strongly recommend that you not sign the tax return if you know it to be incorrect and that you consider obtaining your own tax preparer; preferably a CPA & let him or her deal with the enrolled agent on your behalf; if you were to proceed with a divorce, the inaccuracy of the tax returns will become a major issue; if you ignore the obvious, you will compound your problems; evidently you have signed fraudulent returns in the past, even if unknowingly, that's not a good thing. It sounds like you didn't "review" them in the past with the same level of intensity that you did the 2009 returns.

Customer:

My problem is that I will NOT file with him for 2010 and even for 2011. But does that mean I have to file too being there is no other source of income? If so, how could I possibly figure out what my "income" truly is let alone the deductions if I were having to file alone?

Customer:

You are right, I did not "review" them in the past...I just did not think people could operate on a level such as that until I looked at the 2009 return (to see if my son qualified for federal school grants). That is when I realized that something is not right...along with a great accumulation of cash and investments he was making...it did not make sense.

Customer:

I have never had a business before...was a stay at home mom most of my life.

Customer:

I got the 100k from a loan that my ex husband took out on the house and gave it to my present husband to pay off all his debt before we married. We are now paying back my ex husband monthly payments (it's a good thing for him as his business is barely working anymore).

Stephen E. Grizey :

OK, here's the issue; if you are going to claim that 1/2 the business is yours, then you would want to be including 1/2 of the income in any separate return that you file; in order to do that, you would have to obtain the figures from the Enrolled Agent unless you were to have the raw books & records and figure it out yourself. Obviously, you aren't capable of doing that, nor should you be expected to be able to do that; so you get your own accountant & let him or her deal with the issue on your behalf; that solves a couple of problems; 1) it demonstrates your desire to do things correctly & removes you from a fraudulent tax return & 2) it allows your accountant/CPA to deal with the Enrolled Agent; trust me, if it was me, there would be no bad numbers coming out of her or they would be her last; I'd, as a CPA, turn her into the IRS in a heartbeat if I thought she was doing what you're suggesting she's doing with your husband;

Customer:

Do I have to file a separate return? Or can he just do the filing as "Married filing Separate" and sign it himself and leave me out of it since there is no other income of my own?

Stephen E. Grizey :

Yes. That can be done. It will cost more in taxes and it may hurt you in a divorce situation, which is why when you mentioned that possibility (divorce), I suggested that you seek legal advice sooner rather than later.

Stephen E. Grizey :

If you were to take the position that you had no other income then you wouldn't have to file at all.

Customer:

Thank you...I do not care if it costs more in taxes...if the IRS comes after both of us, I do not want to be on the last years return or the next one either. My husband can just pay those expenses and if he refuses, what is he going to do about it...he still has to pay since I have no other income or property.

Stephen E. Grizey :

Right.

Customer:

We will likely be getting a divorce...but I will definately get an attorney to find out what I am entitled to and what I am liable for....and I can pay that attorney right out of "our" business account since he cannot just throw me off of it.

Stephen E. Grizey :

Right

Stephen E. Grizey :

Please remember to "ACCEPT". Feedback, if you have time & bonuses where you think they are warranted are always most appreciated. I'll be happy to answer any follow-up questions you may have.

Customer:

I think we are finished. I accept. Thankyou!

Customer:

Can I copy this conversation?

Stephen E. Grizey :

You are welcome & good luck,

Stephen E. Grizey :

Yes

Customer:

How?

Stephen E. Grizey :

Well, I'm not sure what operating system you are using, but you should be able to right click & block it off & copy it & then print it.

Stephen E. Grizey :

You can always come back to the conversation here by searching under your name & all your conversations will come up.

Stephen E. Grizey :

Are you all set, I've got to go.................

Stephen E. Grizey :

Please remember to ACCEPT.

Customer:

I have pressed the "Accept" button twice now. Why wont it accept my payment and end the session? I am afraid to keep pressing the button.

Customer:

If you do not receive payment, you can email me and I will get money to you. XXX@XXXXXX.XXX

Stephen E. Grizey :

The site doesn't allow contact outside of our conversation here, so your email doesn't come through. I'll refer the matter to customer service & perhaps they can assist. Thanks for using our service.

Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4037
Experience: Extensive Experience with Tax, Financial & Estate Issues
Stephen G. and 4 other Tax Specialists are ready to help you

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