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I have a complicated question.....sorry in advance. My wife

I have a complicated question.....sorry...
I have a complicated question.....sorry in advance.
My wife & I are getting divorced. She moved out over a year ago. She makes $125K /year and I make $87K / year. We have always filed "married, filing jointly" We also owe about $16K to the IRS for 2010 & 2011. I recently found out that a lot of this back owed taxes is from her raiding her 401Ks those years.
What I'm wondering is should we file married jointly, married filing separately or just separated, each as head of our own house holds?
She doesn’t know that soon I am going to file an Innocent Spouse on her and the taxes that she owes from her financial greediness will be on her alone and my taxes will be mine. I do not feel that I should have to pay for her lousy lifestyle choices.

Any advice will be greatly appreciated!

Ray in CA
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Answered in 7 minutes by:
3/21/2013
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,713
Experience: Taxes, Immigration, Labor Relations
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LEV :

Hi and welcome to Just Answer!
Many married taxpayers choose to file a joint tax return because of certain benefits this filing status allows. In filing jointly, both taxpayers are jointly and severally liable for the tax and any additions to tax, interest, or penalties that arise as a result of the joint return even if they later divorce. Joint and several liability means that each taxpayer is legally responsible for the entire liability. Thus, both spouses are generally held responsible for all the tax due even if one spouse earned all the income or claimed improper deductions or credits. This is also true even if a divorce decree states that a former spouse will be responsible for any amounts due on previously filed joint returns. In some cases, however, a spouse can get relief from joint and several liability.
The complications in your situation arise because you are in a community property state. A spouse's and yours wages, earnings, and net profits from a sole proprietorship are community income and must be evenly split.

LEV :

Community property laws may not apply to an item of community income that you received but did not treat as community income. You are responsible for reporting all of that income item if:
1.You treat the item as if only you are entitled to the income, and
2.You do not notify your spouse of the nature and amount of the income by the due date for filing the return (including extensions).


 

LEV :

There are three types of relief from joint and several liability for spouses who filed joint returns:
1.Innocent Spouse Relief provides you relief from additional tax you owe if your spouse or former spouse failed to report income, reported income improperly or claimed improper deductions or credits.
2.Separation of Liability Relief provides for the allocation of additional tax owed between you and your former spouse or your current spouse from whom you are separated because an item was not reported properly on a joint return. The tax allocated to you is the amount for which you are responsible.
3.Equitable Relief may apply when you do not qualify for innocent spouse relief or separation of liability relief for something not reported properly on a joint return and generally attributable to your spouse. You may also qualify for equitable relief if the correct amount of tax was reported on your joint return but the tax remains unpaid.

LEV :

For information on how and when to request relief from liabilities arising from community property laws, see Community Property Laws in Publication 971, Innocent Spouse Relief.


www.irs.gov/pub/irs-pdf/p971.pdf

Customer:

What I'm wondering is if we file jointly this year......and I file the Innocent Spouse (I.S.)...should we be separated in our taxes starting this year? I imagine that the I.S. will separate the taxes by person for 2010 & 2011. She pulled (without my knowledge or consent) about 12K in 2010 and 38K in 2011! I think she should be paying for her lack of control.....and we are getting divorced.....so I really don't want to help her with her new life.

Customer:

Hello?

Customer:

What do you think?

Customer:

What I'm wondering is if we file jointly this year......and I file the Innocent Spouse (I.S.)...should we be separated in our taxes starting this year? I imagine that the I.S. will separate the taxes by person for 2010 & 2011. She pulled (without my knowledge or consent) about 12K in 2010 and 38K in 2011! I think she should be paying for her lack of control.....and we are getting divorced.....so I really don't want to help her with her new life.


LEV :

What I'm wondering is if we file jointly this year......and I file the Innocent Spouse (I.S.)...should we be separated in our taxes starting this year?
That is your choice... From tax prospective - you may try to file either way and compare before finalizing your tax return.
Generally - you may file a joint tax return ONLY if you both agree. If either of you disagree - you may only file separate tax returns.

Customer:

Hmmmmmm. I've heard that filing married but separatly is has the highest taxes. Is this true?

LEV :

Please be aware that even you file the request for the Innocent Spouse Relief - that request is subject of the approval from the IRS and even approved - you might only get a ratial releif.

Customer:

I didn't know that. I filed out a form on the IRS site that said I qualified for it.

Customer:

Is filing "married but filing separately" as bad as single,head of house hold?

LEV :

I've heard that filing married but separately is has the highest taxes. Is this true?
That is NOT always correct - all depend on individual circumstances. But in most situations - filing separate tax return will result larger overall tax liability. In additional some deductions and credits are not allowed to those filing with "married filing separate" MFS status.
Still you might want to prepare your tax returns both ways and compare.

Customer:

How about my last question?

LEV :

I didn't know that. I filed out a form on the IRS site that said I qualified for it.
See here - http://www.irs.gov/Individuals/Innocent-Spouse-Questions-&-Answers


8. How long will the process take?


When a Form 8857, Request for Innocent Spouse Relief, is filed with the IRS, it may take up to 6 months before a determination is made. During the processing time, the Service is requesting your tax information and contacting the non-requesting spouse. By law, the IRS must contact your spouse or former spouse. There are no exceptions, even for victims of spousal abuse or domestic violence.
So far - the relief should be granted by the IRS - it is not automatically given just because you submit the form.

LEV :

Is filing "married but filing separately" as bad as single,head of house hold?
If you are married - you may not use filing status "Single" - that is not correct status.
You may use the filing status HOH - "head of household" - but there are some requirements to satisfy. In particular - you should not live with your spouse last six months of the tax year and shoudl have a qualified dependent.
Generally HOH filing status is better than MFS.

Customer:

True.......we're still married, but getting divorced....she has been out of the house over a year and I have a son that lives with me.....he's in High School.

LEV :

Then - you do qualify for the HOH status - and that would be more beneficial for you.

LEV :

To qualify for head of household status, you must be either unmarried or considered unmarried on the last day of the year. You are considered unmarried on the last day of the tax year if you meet all the following tests.


1.You file a separate return.


2.You paid more than half the cost of keeping up your home for the tax year.


3.Your spouse did not live in your home during the last 6 months of the tax year. Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances.


4.Your home was the main home of your child, stepchild, or foster child for more than half the year.


5.You must be able to claim an exemption for the child.

Customer:

What would that be considered: Single, HOH? Sorry, I really know nothing about this stuff!

LEV :

Based on your circumstances - HOH would be the most beneficial for you.
However your spouse's tax liability might increase considerably.

Customer:

So I should look at 3 differant ways to file.......HOH, MFS and MFJ? and see which one is the best for me? Sounds exspensive!

LEV :

Generally - if you consern only YOUR tax liability - HOH would be the best way to file. Your spouse might disagree - but that is a different issue.
MFS is your last choice - you will owe more taxes but that will protect you form any tax liability resulted from teh joint tax return.
If you are using a tax preparation software or you are using a tax preparation service - there is an option to compare all filing options without preparing three tax returns.

Customer:

Thanks, XXXXX XXXXX toughest 35 bucks you've made today! I appreciate your help!

Customer:

I'm not concerned with her problems any more. She made her choice......she has to pay her dues for them.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,713
Experience: Taxes, Immigration, Labor Relations
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