Have Tax Questions? Ask a Tax Expert for Answers ASAP
Hello, I am a different expert and disagree with the above expert when they advise "your income is not in play". You listed California as your state. California is a community property state.
Where only one spouse is liable for a tax and that spouse makes an offer in compromise, community property rules apply as follows. Anything that could be classified as the liable spouse's separate property or income should be considered in the offer. In addition, the liable spouse's share of community property and community property income should be considered. If, under the community property laws of the state involved, part or all of the nonliable spouse's share of community property or income would be available to satisfy the tax liability, the portion available should also be considered in the offer in compromise. Treas. Reg.(NNN) NNN-NNNN1(c)(2)(ii)(B).
Community property assets will not be disregarded under this regulation unless inclusion in an offer would have an adverse impact on the taxpayer's ability to meet reasonable living expenses.
As indicated above, the non-offering spouse's share of community property income will be considered to the extent that the liability could be collected from it under state law.
In California, they do not distinguish between pre- and post-marital obligations and allow creditors to collect an obligation from 100% of community property. Therefore, in California the Service may also collect taxes from 100% of community property for all premarital debts of a spouse.
In short your question was will your income be looked at "if my husband wants to try and lower the amount due or", yes, because you live in California.
Thank you for the information. I do have a question regarding the expiration of his tax debt. In 2004 and 2005, when my husband was going through his divorce with his ex-wife, she filed a 1099 for him (they had a business together) and never told him and he never got anything in the mail so he never knew. I think she also filed separately so his '04 and '05 taxes were never filed and he assumed she completed them. It wasn't until this past december when the IRS put a levy on his income that we found out this was outstanding. So, he filed his '04 and '05 taxes in the beginning of 2013. Does the 10 years start now?
Also, after doing some research on community property, I've read that pre-marital debt is separate property. So, it sounds like my income can't be used to pay off his tax debt and according to what you said, my income will only be taken into account when figuring out his percentage if income and expenses for the household. Is that right? My husband thinks we have to get divorced so they will only see his income as a single person and he can negotiate down what is owed.
hello again. sorry for the ongoing clarification but what if he is not attached to any of my bank accounts or the small LLC that I have. Basically, his name is not on anything that is mine, so no comingling. I did start the LLC a few months ago and we were married at the time. Is my LLC half his and so the income I get from that business is half his?
He has other years of tax debt so would he be even eligible for an offer in compromise? Thank you.