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I have a back tax liability for years 2013-2016 for around $36K. I am married, but we file separately. We got married in 2016. We are trying to figure out how to fill out the form with a non-liable spouse. We've seen guidance on prorating, but no specific instructions. We are just not sure how to fill in income and expenses, given that we file separately.

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1/21/2018
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 4,806
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

Do you need help with Form 8379 (Injured Spouse)?

What state do you reside in?

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Customer reply replied 1 month ago
Hi Barbara, no I don't need help with Form 3279. We live in Maryland. Here’s our situation:
Back tax liability for years 2013-2016. Married in 2016. We file separately and my wife and I do not have any joint tax liability.
Everything we’ve read online says that the non-liable spouse’s income is not taken into account in determining the OIC, but the 433A asks for her income (line 32). Should we include her total monthly income at all?
If we don’t include her income, do we just prorate our shared expenses? For instance, if my income is 44% of our total combined income, so I just multiply our shared expenses by that amount?

I understand.

You are making the OIC for your own tax liability?

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Customer reply replied 1 month ago
it is for my own tax liability.

You would include the total income and total expenses.

Please know that OICs are very difficult to obtain if the IRS feels the tax debt can be paid. The IRS will only approve the OIC if it believes there is no way it can collect the full amount that is owed.

The better alternative would have been to file as MFJ when you got married and use Form 8379 for your wife as the injured spouse. This way, she would have received her portion of the refund, and your portion would have used to pay down the debt.

Married filing separate is the least advantage filing status.

Did you use the OIC prequalifier on the IRS website to determine if you do qualify?

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Customer reply replied 1 month ago
Thanks for the feedback - that is something we will look into. When I use the prequalifier with my income and my prorated portion of the expenses, I qualify. If I include her income as well as mine and our total expenses, I don't qualify. I'm a bit confused as the IRS says it doesn't consider the income of a non-liable spouse, but rather the remaining funds left after considering the prorated percentage of expenses based how much my income contributes to our total household income.

That's correct. It is YOUR total income and expenses. I apologize if I was not clear.

The IRS will also look at jointly owned assets.

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Customer reply replied 1 month ago
OK, so then I don't include her income on the OIC? It is just confusing given the item#32 on the 433A asks for her income.

It's just the way the form is drawn up. It takes into account if both of you had the tax liability.

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Customer reply replied 1 month ago
OK, I think that makes sense. So, just to confirm. I would submit the OIC with just my gross income and my expenses. My expenses would be any of those that are solely mine and a prorated percentage of our shared expenses. Our prorated shared expenses would be the total shared expense multiplied by the percentage my income contributes to our total income, which in our case is 44%. Is that all correct?

Actually, Line 32 clearly states to include the income of the non-liable spouse.

Is this the form you are using: https://www.irs.gov/pub/irs-pdf/f656b.pdf

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You will include your wife's income on Line 32 and you will use the total of the household expenses. No proration is necessary.

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Customer reply replied 1 month ago
that is the form I am using.

Then, you include your wife's income on that line.

And as I mentioned, you will include the total household expenses.

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Customer reply replied 1 month ago
But then the OIC is taking into account my wife's income in the OIC, which I thought it wasn't supposed to do since she isn't liable?

She isn't liable, but for information purposes, the IRS wants to know the total household income in order for them to consider the OIC.

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That is what I initially meant when I said an OIC is very difficult to get approved. The IRS will only approve it if they feel there is no way to collect the full tax liability.

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Customer reply replied 1 month ago
But it includes her income in the calculation of remaining monthly income then? Essentially, the IRS is assuming it can pull from my wife's income to pay back my tax liability, even though she isn't liable?

No. The IRS is not assuming that it can take part of your wife's income to pay your debt, but it is considering the fact that there is other income in the household besides yours.

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The bot***** *****ne is the IRS wants their money, and if they believe that the full debt can be paid, they will not approve the OIC.

It would be better amending your prior year returns to MFJ and use Form 8379 for your wife.

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Using Form 8379 puts the IRS on notice that your wife is NOT responsible for any of your tax liability even though you are filing MFJ.

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Customer reply replied 1 month ago
OK, so it sounds as though in the future we might want to consider MFJ and a form 8379. We only got married in late 2016, so the back tax liability wouldn't be changed much by amending past returns.
Customer reply replied 1 month ago
As far as the OIC, it sounds like it just might not work for us.

I would definitely amend 2016 to MFJ and use Form 8379. File 2017 as MFJ and use Form 8379.

MFS is the LEAST ADVANTAGEOUS filing status.

I do not believe the IRS will approve the OIC, but at least you have another alternative to repay your tax liability and keep your wife out of it.

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Customer reply replied 1 month ago
Given that I had this tax liability and my wife owns a house in her name only, we were trying to make sure that the house was protected. Would that be the case with the MFJ and form 8379?

Yes. If the house is in her name only, using MFJ and Form 8379 will continue to protect her house.

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Customer reply replied 1 month ago
OK, thanks for all of the info Barbara. This has been helpful.

My pleasure.

Let me know if you need more help on this.

My goal is to provide you with excellent service. Please take a moment to rate my answer with a 5-star rating to let me know that I have achieved my goal.

Thank you.

Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 4,806
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Customer reply replied 1 month ago
Will do. Thanks again, have a great night.

You're welcome.

Enjoy what's left of the weekend!

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Barbara
Barbara
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Category: Tax
Satisfied Customers: 4,806
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