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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3898
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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My wife abandoned the home in early march 2012 and did not

Resolved Question:

My wife abandoned the home in early march 2012 and did not provide a forwarding address and phone number. I asked H&r block to file a married filing separately return so I could file on time. Now that we are in separation agreement negotiations my spouse wants to file separately and presumably claim the same mortgage interest deductions and real estate taxes I claimed. Can she legally do this when she failed to be available for filing a joint return? We were both signatories to the mortgage and the payments were made out of a joint checking account (jtwros). How can I avoid this ugly situation and make sure I don't pay any money back to IRS.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor :

Hi,

NPVAdvisor :

Please don't shoot the messenger here, but, yes, given the information you've provided, she has a right to deduct 1/2/ of the mortgage interest

NPVAdvisor :

And taxes

NPVAdvisor :

Typically the question we get here is HOW do we split the mortgage interest and real-estate taxes

NPVAdvisor :

Given the fact that you had no choice but to file separately, (to file jointly would have required her signature, and the claim that she was not available and that one together would suggest REAL trouble, forgery)

NPVAdvisor :

The intuitive thought here is that you should just file an amended return

NPVAdvisor :

and make the adjustment ... that would be the cleanest, most efficient, and the solution with the least acrimony

NPVAdvisor :

If you wanted to fight the battle, you MIGHT (and this one might be a reach) try to use something called innocent spouse relief and ask to be granted the deductions, (because you had no way of contacting her, and her behavior lead you to believe that shw would abandon her other obligations as well

NPVAdvisor :

But UNDERSTAND, that innocent spouse relief is TYPICALLY used to grant relief from joint and several liability on joint returns when you have no control over the situation

NPVAdvisor :

Again, a reach

NPVAdvisor :

another though, take no action, and then use the aforementioned facts to ask for a first time penalty abatement if you end up having a small penalty for the eventual additional taxes owed

NPVAdvisor :

And that is really all that will happen here ... given the facts as you presented them here, you had no intent, so this will not be a tax evasion issue, it would simply reslut on your owing addition taxes and maybe a small late penalty if it isn't resolved fairly quickly

NPVAdvisor :

... situation isn't really all that "ugly" If you can't afford the additional taxes (and POSSIBLE penalty), as long as the amount owed is less than $50,000 you can set up an installment agreement online here: http://www.irs.gov/Individuals/Online-Payment-Agreement-Application

Customer:

Before we go further, what did you mean by "forgery"?

NPVAdvisor :

Just to come full circle, she DOES have the ability to claim the deductions, and you can simply amend your return to reduce them by half

NPVAdvisor :

If she is not there..... and a joint return floated in, someone (presumably you) would have to have forged her signature on the joint return

NPVAdvisor :

all that is to say ... you had no choice but to file separately

NPVAdvisor :

and further, that it would have been reasonable to assume that she was not going to file, given her abandonment of all the other joint obligations ... You may want to have your attorney use that logic to argue that you have a right to the deductions

Customer:

I am a lawyer. Not a tax lawyer. I still don't understand you reference to forgery. I obediently filed my separate return on time when I couldn't find my wife and asked H&r Block to take any deductions to which I was entitled. I was willing to file a joint return but my wife went off the radar and couldn't be found. If she refuses to pay taxes on time am I not entitled to file in accordance with H&R block's advice. I can't afford to renogiate this issue. If I gave up half the deductions for mortgage interest and real estate taxes it would be suicidal in my financial situation. Since the mortgge inteest was paid from a joint account doesn't that allow me to claim that I paid the mortgage. After all either party could have emptied that account at their will. My lawyer has already overcharged me by thousands for what I consider to be an abominable piece of work. I can't afford to ask him any more questions.

NPVAdvisor :

You're over-reacting.

NPVAdvisor :

I am agreeing with you ... the forgery is the ONLY WAY YOU COULD HAVE filed a joint retun .... SHE WASN'T THERE

NPVAdvisor :

First you say that you don't want to re-negotiate, then you say that your having access to a joint return gives you the right to deduct ALL of the mortgage interest. ... If the money came from a joint account, that only reinforces that she had a right to deduct 1/2

NPVAdvisor :

pardon me ... access to a "joint account"

NPVAdvisor :

That one's a reach too

NPVAdvisor :

My apologies, but YES, she has a right to deduct, especially if the actual payment was made from joint funds, even ore so if her name is XXXXX XXXXX loan

NPVAdvisor :

If she (1) is on the loan (2) is on the deed to the securing asset, the home (3) owns 1/2 interest in the property of your checking account, you have no case (Again, hopefully having all the facts will allow you to "see around some corners" here.)

NPVAdvisor :

But again, the income tax piece here, is simply the reduction by 1/2 of the property tax and the mortgage interest. (and the cost to you will only be your marginal tax rate x that number) ... if this is a reduction in tax deductions of say 20,000 and you are in the 35% bracket, then the cost will be $7000 in tax

NPVAdvisor :

Questions?

NPVAdvisor :

I see your options as (1) simply refusing to sign anything saying she has the RIGHT to 1/2, since she wasn't there to file the joint return (they could buckle) ... (2) amend your return and ask for an installment agreement on the additional funds owed ... If she's on the loan, is on the deed and has joint onwership in the account from which the mortgage interest was paid, she DOES have a right to 1/2 of this deductions

NPVAdvisor :

Are you still with me here? We've been at this for and hour and 45 minutes, If we go another 15 that makes my pay about $15 per hour

NPVAdvisor :

How else can I help you today?

Customer:

Yes I'm with you but also on the phone with IRS. BaCK IN A MOMENT

NPVAdvisor :

Very good, I'll wait ... Thank you

Customer:

sorry for the delay. IRS can be quite wordy and confusing. She is on the loan but was never on the deed. She and I owned the checking account jointly out of which the mortgage payments were made. The ultimate question is whether (without any knowledge of her finances at all) I should now propose to her lawyers that we amend and file jointly or fight out the fact that she made herself unavaible to file timely and I was forced to file separately and take all deductions H&R block told me were legitimate and proper. If relevant, my income is approximately $30,000 a year from SS and drawing down my IRA and other investment income. She is employed has several pensions and earns approximately $100,000 a year.

NPVAdvisor :

Ahhh, it certainly does affect her more financially: Here are the brackets for filing separate:



  • 10% on taxable income from $0 to $8,925, plus

  • 15% on taxable income over $8,925 to $36,250, plus

  • 25% on taxable income over $36,250 to $73,200, plus

  • 28% on taxable income over $73,200 to $111,525, plus

  • 33% on taxable income over $111,525 to $199,175, plus

  • 35% on taxable income over $199,175 to $225,000, plus

  • 39.6% on taxable income over $225,000.

NPVAdvisor :

So, as you can see she has a lot more to lose here, because those deduction are worth at least 33% to her ... and 15% to you

NPVAdvisor :

Tat may be something you can use .... BUT, I think you've distilled it well ... maybe you can counter with taking a larger portion of the deduction that would have the effect of equalizing your costs

Customer:

So, what should I do? I am barely living on the poverty line and using up the last of my investment income. In five to seven years I will be a ward of the State of Nevada. I can't live on SS of $970 a month. Money spent for any purpose at this stage of life simply shortens my life span as I will not permit myself to become a ward of the State of Nevada.

NPVAdvisor :

All I can contribute it what the IRS should have told you, that since she has liability for the loan (I think that's what it really turns on) she has as much right to deduct the interest as you ... and I think that the policy consideration of the law here would be that you are supposed to work these thing out ... as you probably remember from your law school days, courts expect married couples to work things out and don't usually enforce contracts ... and please don't think I'm making light here, ...

NPVAdvisor :

But I think you've answered your own questions .. If you're not willing to, you need to fight on this one ... as I said very early on here

NPVAdvisor :

You had to do what you did because she forced the issue byt leaving... irresponsibly

NPVAdvisor :

Further H&R Bolck advised you to take the deductions

NPVAdvisor :

What will have to be balanced here is that irresponsibility, with the fact that under NORMAL circumstances she is entitled to the mortgage interest deduction too

Customer:

I don't think you are making light. My only bargaining leverage seems to be that her lawyer is obsessed with getting a release from me for whatever rights to her pension I may have. My lawyer is too busy billing time to actually act as a responsible, ethical lawyer but his billing system does not depend on accomplishment. Like most lawyers its strictly by the hour which the client can't really monitor.

NPVAdvisor :

OK, now I am not a divorce lawyer but given what you said about your respective incomes, you certainly have a case to whatever pension rights are there ... I don't want to presume that I understand everything here, but maybe you sue for divorce and ask for a settlement that reflects what you both brought to the marriage

NPVAdvisor :

Have you though about asking a good divorce lawyer (a different one) to look at this on a contingency basis?

Customer:

Thank you. We've probably gone as far as we can on this subject. I have never known a divorce lawyer to take a contingency case. They are too greedy for that unless you have a slam dunk case; which obviously I don't have. Once I get the separation agreement I will file in Nevada and represent myself. But in Nevada to get a quickie divorce you must have a signed and notarized Marital Separation Agreement. And there is the rub.

Customer:

One other subject, when I signed onto this website it said the fee was $66. Is that still correct?

NPVAdvisor :

Sounds like the fight is right here right now then .. he's trying to scare you with the TAX word, but you've done nothing wrong... My gut say stick to your guns

NPVAdvisor :

That's right 33 for me 33 for them

Customer:

Thank you. I will give you a big smilie.

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3898
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 7 other Tax Specialists are ready to help you

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