Divorce Creates Tax Debt

U

Unregistered

Guest
Chronology of events:

Married in 1996, man, age 21
Husband main income earner, wife worked sporadically, Married filing joint taxes
Husband joins military in 1999
Couple purchase home in 2001
Exit military in 2003
Husband cannot find job in military town
Dec 2004 House foreclosed upon
Couple liquidates assets (vehicles, etc) to put together enough money to move back to hometown and start over
They move into 1Bdrm with some furniture, clothes and 2 cars
Feb 2005 Husband finds job
April 2005 Husband suspects and accuses Wife of infidelity. Marriage breaks-up, Wife moves to another state, lives with another man
Husband continues to provide some financial support in the form of maintaining vehicle loan and insurance payments for wife's car, while also paying back creditors
Hope-filled attempted reconciliation in 2007, Wife moved back, 2 weeks later reconciliation fails, wife leaves
By State law the 'clock' starts over (with any cohabitation), again requiring 1-year separation before divorce filing
Note* Husband's other choice was to cite infidelity, but instead desired a 'civil' divorce
2008 Divorce filed by Husband (married filing separate taxes filed). Husband does all paperwork himself, no money for lawyers
Latter part of 2008 Divorce finalized
2009 Man completes repayment to all creditors from failed marriage, man's credit score improves
Latter 2009 Man marries new Wife, lives happily ever after....
UNTIL....

Husband receives letter from IRS stating that ex-wife earned an income and filed taxes in 2007. Husband knew nothing about this. IRS states that conflict of status has triggered a series of penalties, interest and fees totaling nearly $8,000 that he is liable for.

New wife has not yet been told of tax debt, AND they just purchased a home in 2010, expecting to receive the $8,000 tax credit (kiss that goodbye???). IRS says you have until 28 April to pay- OR ELSE!

He has no idea where ex-wife lives, has had no contact with her since reconciliation failed. Only contact has been via court filings during divorce proceedings.

Husband seeks tax-expert who says that unless he secures the ex-wife's agreement, he will have to pay the $8,000 as he filled out and signed the tax returns. Tax-Expert says that with her cooperation they can re-file (probably still have penalties - but nowhere near $8k). Husband seeks out lawyer, who also says he's screwed. He followed tax-expert's advice to make payment agreement with IRS and agrees to pay $127/month until the debt is repaid or he finds other solution.

What should he do?
 
Step #1: Tell the wife, better she find out from you than to ask later about the 8 Grand she had her eye on

Sounds like he's asking if he should try and contact the Ex or just forfeit the $8,000. In this situation, both sound painful. I'd say decide which is more painful and DO THAT (it probably would work out better).

Step #2: Imma hafta get bak to ya on that one. I'm no tax expert, and I would have suggested you hire experts but it looks like you've already done so (or maybe just a consult?)
 
I guess if that happened to me, it'd make *me* sick.

Assumed, reading between lines, husband filed 2007 "Married Filing Jointly"?

Did wife sign return?

There are "innocent spouse" defenses - need to consult tax expert. Likely stuck, but I am no tax lawyer - ask one!
 
I don't have advice other than listen to your hired guns.

Why not cite infidelity? Were kids involved?
 
Greg, maybe thinking how this crap can produce enough stress to cause medical unfit for flight you would be cool with this being in MM. B)
 
Does anyone even notice what forum posts are in? I try to put mine in the correct forum, but when I log on to read, I get a list of new post titles and click away, without noticing what forum they are in.

To the O.P. sorry for your mess; some relationships just seem to keep on giving.
 
This sure sounds like it may be possible to file as an Innocent Spouse:
To qualify for innocent spouse relief, you must meet all of the following conditions:
Click to expand...

  • You must have filed a joint return which has an understatement of tax;
  • The understatement of tax must be due to erroneous items of your spouse;
  • You must establish that at the time you signed the joint return, you did not know, and had no reason to know, that there was an understatement of tax;
  • Taking into account all of the facts and circumstances, it would be unfair to hold you liable for the understatement of tax; and
  • You must request relief within 2 years after the date on which the IRS first began collection activity against you after July 22, 1998
Click to expand...
My wife is an Enrolled Agent and the best tax problem solver in Texas. The next time I see her (she's pretty scarce this time of year) I'll show her your post and see what she says.

Good luck.
​
 
Here is the email I got from my wife after I copied this tax issue to her:

SO CALLED "Tax Expert" isn't.

He is not screwed.

He should immediately gather all pertinent documents and file Innocent Spouse Agreement.

HIS NEW WIFE should file form 8379 as "Injured Spouse" and will receive part of refund.

He could refile joint but only for a short time longer (statutory period).

TELL HIM TO CALL ME FOR FREE TALK
Click to expand...
If you want to talk to her, PM me for her phone number.

In any case you really should seek the help of an Enrolled Agent or CPA who is experienced in injured/innocent spouse issues.

In my opinion this is not the kind of case that needs a tax attorney, but you would be much better off with someone who is licensed to represent you to the IRS, i.e. Enrolled Agent or CPA.
 
Last edited:
Take life insurance policy out on ex-wife, ex-wife has accident, problem solved!

Just Joking!!
 
Jim - In Texas, what a great thing to do here for a fellow aviator. Kudos to you and your bride.
 
Henning said:
Do you still have a valid life insurance policy on the ex?
Click to expand...

There's a country song about that:

"I caught my wife with another man, and it cost me 99..."
 
Old Thread: Hello . There have been no replies in this thread for 365 days.
Content in this thread may no longer be relevant.
Perhaps it would be better to start a new thread instead.
Back
Top