Tax Debt After Divorce - Cuyahoga Co Ohio

J

Julia2024

New Member
Jurisdiction
Ohio
Hello,

My divorce decree states my ex husband is liable for $13,000 in tax debt to the IRS, which he has not been paying and therefore the amount is over $25,000 now. Unbeknownst to me, the IRS does not care nor will they uphold the divorce stipulation (I assumed $13,000 in credit card debt that we accrued during the marriage). My attorney advised me to file an Innocent Spouse appeal which was rejected multiple times. I am at my wits' end about what to do. I am financially destitute and my ex husband will not pay the taxes. The IRS has been taking from my returns and when this happens, I turn around and have my divorce attorney file a contempt of court to my ex husband, which only then will he pay the amount by issuing a check directly to me. At this rate, the debt will never get paid down and the IRS will keep coming after me forever.

I am seeking a tax attorney to ask what other options I may have? Thank you
 
What kind of income did he have that resulted in the liability? And was each application for relief based only on innocent spouse? What tax year(s) are involved and were they filed on time? That's what I'll need to get a sense of what might help you. Note that the reason the IRS doesn't care about any allocation of the tax liability in the decree is because state court actions are not binding on federal agencies, which means the IRS has to apply its usual collection procedures.
 
Tax Counsel said:
What kind of income did he have that resulted in the liability? And was each application for relief based only on innocent spouse? What tax year(s) are involved and were they filed on time? That's what I'll need to get a sense of what might help you. Note that the reason the IRS doesn't care about any allocation of the tax liability in the decree is because state court actions are not binding on federal agencies, which means the IRS has to apply its usual collection procedures.
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adjusterjack said:
Stick around. We have a tax attorney who participates here and may make some helpful comments.
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Thank you!
 
Tax Counsel said:
What kind of income did he have that resulted in the liability? And was each application for relief based only on innocent spouse? What tax year(s) are involved and were they filed on time? That's what I'll need to get a sense of what might help you. Note that the reason the IRS doesn't care about any allocation of the tax liability in the decree is because state court actions are not binding on federal agencies, which means the IRS has to apply its usual collection procedures.
Click to expand...
Thank you Tax Counsel for your response. My ex husband has an LLC and so gets 1099's at end of year and he has not been paying the taxes. My divorce attorney advised I file an innocent spouse which I did several times and the IRS keeps rejecting it. The years are from 2013 to 2019 I believe. My divorce was final in May of 2019 so I certainly should not be liable for that. Yes my accountant filed them all on time for me. Do I have any options to get out of this nightmare?
 
Julia2024 said:
Thank you Tax Counsel for your response. My ex husband has an LLC and so gets 1099's at end of year and he has not been paying the taxes. My divorce attorney advised I file an innocent spouse which I did several times and the IRS keeps rejecting it. The years are from 2013 to 2019 I believe. My divorce was final in May of 2019 so I certainly should not be liable for that. Yes my accountant filed them all on time for me. Do I have any options to get out of this nightmare?
Click to expand...

Did your accountant file only for innocent spouse relief or was equitable relief also requested? In the situation you described if you signed the joint return with the self-employment income included on it, then innocent spouse relief normally wouldn't be granted because you knew of the problem, and innocent spouse is more geared to tax liabilities that you didn't know about, like income that your ex-spouse didn't put on the return and therefore you had no knowledge of it when you signed. There is also a fairly short time limit for innocent spouse which is a broad form of relief, that you may unfortunately have missed. Requests for either separation of liability or equitable relief might succeed where innocent spouse doesn't, though separation of liability is subject to a fairly short time period to request relief. Equitable relief doesn't have the same short time period, but requires more information for the IRS to consider and the IRS has more discretion on whether that relief should be granted. It used to be that you had to make each request separately; now the IRS has a form allowing for applying for all three at once and then the IRS would decide which of the three, if any, would apply. I don't know what your CPA submitted and what the exact response of the IRS was, so I can't say if those other forms of relief were considered or not.

The current version of Publication 971, though titled Innocent Spouse Relied, covers all three forms of relief, what the requirements are, and what to do to seek relief. See also Form 8857 and the related instructions for more specific information on what is required to seek relief.

If your CPA only pursued innocent spouse relief and not the others, you may want to consider finding a different tax professional familiar with all three forms of relief for advice and assistance.
 
Tax Counsel said:
Did your accountant file only for innocent spouse relief or was equitable relief also requested? In the situation you described if you signed the joint return with the self-employment income included on it, then innocent spouse relief normally wouldn't be granted because you knew of the problem, and innocent spouse is more geared to tax liabilities that you didn't know about, like income that your ex-spouse didn't put on the return and therefore you had no knowledge of it when you signed. There is also a fairly short time limit for innocent spouse which is a broad form of relief, that you may unfortunately have missed. Requests for either separation of liability or equitable relief might succeed where innocent spouse doesn't, though separation of liability is subject to a fairly short time period to request relief. Equitable relief doesn't have the same short time period, but requires more information for the IRS to consider and the IRS has more discretion on whether that relief should be granted. It used to be that you had to make each request separately; now the IRS has a form allowing for applying for all three at once and then the IRS would decide which of the three, if any, would apply. I don't know what your CPA submitted and what the exact response of the IRS was, so I can't say if those other forms of relief were considered or not.

The current version of Publication 971, though titled Innocent Spouse Relied, covers all three forms of relief, what the requirements are, and what to do to seek relief. See also Form 8857 and the related instructions for more specific information on what is required to seek relief.

If your CPA only pursued innocent spouse relief and not the others, you may want to consider finding a different tax professional familiar with all three forms of relief for advice and assistance.
Click to expand...
Actually it was my divorce attorney who advised me to file the Innocent Spouse and I did it myself. This was the only form of relief that I filed with the IRS. Should I try filing "Publication 971"?
 
IRS Announces New Effort to Help Struggling Taxpayers Get a Fresh Start ...
https://www.irs.gov/pub/irs-news/ir-11-020.pdf


https://www.jacksonhewitt.com/tax-h...taxes/what-is-the-irs-fresh-start-initiative/


What is the IRS Fresh Start Program?


https://www.communitytax.com/services/tax-resolution/fresh-start-initiative/



The IRS Fresh Start Initiative: What Is It and How Does It Work?

Offer in Compromise | Internal Revenue Service


If you owe federal income tax and can't pay in full, the IRS Fresh Start program can help you get caught up. Fresh Start was established by the federal government in 2011 to offer some relief to taxpayers and curb predatory practices by the IRS. Under the Fresh Start Initiative, eligible taxpayers can enroll in a payment plan to clear their tax debt or negotiate an agreement to pay less than what's owed. Either one could help you get back on track financially if you have an outstanding tax bill. You can also talk to a financial advisor about how to manage your tax liability going forward.


Understanding IRS Fresh Start
The IRS Fresh Start program or Fresh Start initiative was established in 2011 to help eligible taxpayers manage past-due tax debts. The program is designed to aid people who don't have a prior history of unpaid taxes and aren't subject to a federal tax lien.

Fresh Start offers help in one of four ways:

Payment plans
Offers in compromise
Currently not collectible status
Penalty abatements
The main goal of the Fresh Start program is to help individuals and business owners resolve their federal tax debt, without being unfairly penalized by the IRS. That includes allowing taxpayers who might otherwise be subject to a tax lien to avoid that scenario.

IRS Fresh Start Tax Relief Options

As mentioned, there are four avenues taxpayers can use to get tax relief through the Fresh Start initiative. Each one is designed to meet a different type of need.

If you're interested in seeking tax relief through Fresh Start, here's how the options compare.

Payment plans: The IRS offers short- and long-term payment plans, also referred to as installment agreements, to eligible taxpayers. Short-term plans must be paid in full within 180 days while long-term plans may allow you up to 84 months to repay tax debt, depending on how much you owe.
Offer in compromise: An offer in compromise allows you to repay tax debt for less than what you owe. You must be able to prove a financial hardship that prevents you from paying what you owe in full. If approved, you'd need to be able to pay the IRS an agreed-upon amount to settle your tax debt in a series of periodic payments.
Currently not collectible status: Currently not collectible status allows you to claim financial hardship and temporarily pause your obligations to repay your tax debt. While your account is marked as currently not collectible, the IRS cannot take any collection actions against you and must halt any levies, including bank account levies and tax refund offsets.
Penalty abatement: When you fail to pay taxes on time, penalties and interest can accrue. Penalty abatement allows you to get some relief from penalties if you owe a significant amount of tax debt.
Who Qualifies for IRS Fresh Start Relief?
Generally speaking, you may qualify for help through the Fresh Start program if you:

Owe federal income tax
Don't have a history of unpaid taxes
Are not yet subject to a federal tax lien
Cannot pay your tax bill in full
If you're specifically interested in a payment plan, your ability to qualify can depend on how much you owe. You may qualify to apply online for a long-term payment plan if you owe $50,000 or less in combined tax, penalties and interest, or for a short-term plan if you owe $100,000 or less. Business owners can apply online for a long-term payment plan if they've filed their tax return and owe $25,000 or less in combined tax, penalties and interest.

The IRS approves Offers in Compromise on a case-by-case basis. To apply, you'll need to have filed all required tax returns and made the required estimated payments. You can't be in a bankruptcy proceeding and you must have filed a valid tax extension. Approval is based on your:

Ability to pay
Income
Expenses
Asset equity
The IRS encourages taxpayers to explore payment plan options before applying for an Offer in Compromise.

You'll need to contact the IRS to apply for currently not collectible status if you're experiencing a significant financial hardship. The IRS may ask you to file any past-due tax returns if you haven't done so and you'll likely need to provide documentation proving your hardship situation. Late payment penalties and interest will continue to accrue on your account.

If you receive an IRS notice for back taxes, the notice may include instructions on how to apply for penalty abatement. You'll need to call the IRS and provide some information to the IRS about your taxes and financial situation. You can also submit Form 843, Claim for Refund and Request for Abatement if you're not able to call.

IRS Fresh Start Advantages and Disadvantages
The Fresh Start program is designed to offer some benefits to people who are dealing with unpaid tax debt. Specifically, this program can help you to avoid:

IRS levies
Federal tax liens
Wage garnishments
Criminal penalties
Once you qualify for Fresh Start relief through a payment plan or Offer in Compromise, you're automatically sheltered from those types of outcomes since you're making an effort to resolve your debt with the IRS.

Claiming currently not collectible status can also create some breathing room financially if you're experiencing an extreme hardship that leaves you unable to pay what you owe. Penalty abatement, meanwhile, can reduce some of what you owe in penalties to the IRS.

Fresh Start is not a perfect solution, however. If you enroll in a payment plan, then penalties and interest will continue to accrue until the balance is paid in full. So, the total paid can exceed more than your actual tax balance due.

If you're interested in an Offer in Compromise, it's also important to keep in mind that getting approved can be challenging. The IRS wants to collect as much of your unpaid tax debt as possible. If you're unable to provide sufficient proof of a hardship that keeps you from paying in full, you may be denied. In that case, you'd have to reconsider a short- or long-term payment plan.

The Bottom Line

IRS Fresh Start can help you get out of a tax debt hole if you owe money to the federal government. If you also owe state income tax, you'd need to reach out to your state tax authority to discuss repayment options. The most important thing to remember if you owe taxes is that some action is better than none since your obligation to pay won't go away.

Tax Planning Tips
Staying on top of your tax situation can help you avoid being hit with a surprise bill when it's time to file your return. Talking to a financial advisor about how to minimize your tax liability can ensure that you're paying enough to stay in favor with the IRS, without paying more than you need to. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now.
The simplest way to avoid IRS tax penalties and interest is to pay what you owe by the filing deadline. If you don't have cash readily available to pay, you might consider getting a personal loan to pay instead.

IRS Fresh Start: Tax Repayment Options | SmartAsset
 
army judge said:
IRS Announces New Effort to Help Struggling Taxpayers Get a Fresh Start ...
https://www.irs.gov/pub/irs-news/ir-11-020.pdf


https://www.jacksonhewitt.com/tax-h...taxes/what-is-the-irs-fresh-start-initiative/


What is the IRS Fresh Start Program?


IRS Fresh Start Initiative



The IRS Fresh Start Initiative: What Is It and How Does It Work?

Offer in Compromise | Internal Revenue Service


If you owe federal income tax and can't pay in full, the IRS Fresh Start program can help you get caught up. Fresh Start was established by the federal government in 2011 to offer some relief to taxpayers and curb predatory practices by the IRS. Under the Fresh Start Initiative, eligible taxpayers can enroll in a payment plan to clear their tax debt or negotiate an agreement to pay less than what's owed. Either one could help you get back on track financially if you have an outstanding tax bill. You can also talk to a financial advisor about how to manage your tax liability going forward.


Understanding IRS Fresh Start
The IRS Fresh Start program or Fresh Start initiative was established in 2011 to help eligible taxpayers manage past-due tax debts. The program is designed to aid people who don't have a prior history of unpaid taxes and aren't subject to a federal tax lien.

Fresh Start offers help in one of four ways:

Payment plans
Offers in compromise
Currently not collectible status
Penalty abatements
The main goal of the Fresh Start program is to help individuals and business owners resolve their federal tax debt, without being unfairly penalized by the IRS. That includes allowing taxpayers who might otherwise be subject to a tax lien to avoid that scenario.

IRS Fresh Start Tax Relief Options

As mentioned, there are four avenues taxpayers can use to get tax relief through the Fresh Start initiative. Each one is designed to meet a different type of need.

If you're interested in seeking tax relief through Fresh Start, here's how the options compare.

Payment plans: The IRS offers short- and long-term payment plans, also referred to as installment agreements, to eligible taxpayers. Short-term plans must be paid in full within 180 days while long-term plans may allow you up to 84 months to repay tax debt, depending on how much you owe.
Offer in compromise: An offer in compromise allows you to repay tax debt for less than what you owe. You must be able to prove a financial hardship that prevents you from paying what you owe in full. If approved, you'd need to be able to pay the IRS an agreed-upon amount to settle your tax debt in a series of periodic payments.
Currently not collectible status: Currently not collectible status allows you to claim financial hardship and temporarily pause your obligations to repay your tax debt. While your account is marked as currently not collectible, the IRS cannot take any collection actions against you and must halt any levies, including bank account levies and tax refund offsets.
Penalty abatement: When you fail to pay taxes on time, penalties and interest can accrue. Penalty abatement allows you to get some relief from penalties if you owe a significant amount of tax debt.
Who Qualifies for IRS Fresh Start Relief?
Generally speaking, you may qualify for help through the Fresh Start program if you:

Owe federal income tax
Don't have a history of unpaid taxes
Are not yet subject to a federal tax lien
Cannot pay your tax bill in full
If you're specifically interested in a payment plan, your ability to qualify can depend on how much you owe. You may qualify to apply online for a long-term payment plan if you owe $50,000 or less in combined tax, penalties and interest, or for a short-term plan if you owe $100,000 or less. Business owners can apply online for a long-term payment plan if they've filed their tax return and owe $25,000 or less in combined tax, penalties and interest.

The IRS approves Offers in Compromise on a case-by-case basis. To apply, you'll need to have filed all required tax returns and made the required estimated payments. You can't be in a bankruptcy proceeding and you must have filed a valid tax extension. Approval is based on your:

Ability to pay
Income
Expenses
Asset equity
The IRS encourages taxpayers to explore payment plan options before applying for an Offer in Compromise.

You'll need to contact the IRS to apply for currently not collectible status if you're experiencing a significant financial hardship. The IRS may ask you to file any past-due tax returns if you haven't done so and you'll likely need to provide documentation proving your hardship situation. Late payment penalties and interest will continue to accrue on your account.

If you receive an IRS notice for back taxes, the notice may include instructions on how to apply for penalty abatement. You'll need to call the IRS and provide some information to the IRS about your taxes and financial situation. You can also submit Form 843, Claim for Refund and Request for Abatement if you're not able to call.

IRS Fresh Start Advantages and Disadvantages
The Fresh Start program is designed to offer some benefits to people who are dealing with unpaid tax debt. Specifically, this program can help you to avoid:

IRS levies
Federal tax liens
Wage garnishments
Criminal penalties
Once you qualify for Fresh Start relief through a payment plan or Offer in Compromise, you're automatically sheltered from those types of outcomes since you're making an effort to resolve your debt with the IRS.

Claiming currently not collectible status can also create some breathing room financially if you're experiencing an extreme hardship that leaves you unable to pay what you owe. Penalty abatement, meanwhile, can reduce some of what you owe in penalties to the IRS.

Fresh Start is not a perfect solution, however. If you enroll in a payment plan, then penalties and interest will continue to accrue until the balance is paid in full. So, the total paid can exceed more than your actual tax balance due.

If you're interested in an Offer in Compromise, it's also important to keep in mind that getting approved can be challenging. The IRS wants to collect as much of your unpaid tax debt as possible. If you're unable to provide sufficient proof of a hardship that keeps you from paying in full, you may be denied. In that case, you'd have to reconsider a short- or long-term payment plan.

The Bottom Line

IRS Fresh Start can help you get out of a tax debt hole if you owe money to the federal government. If you also owe state income tax, you'd need to reach out to your state tax authority to discuss repayment options. The most important thing to remember if you owe taxes is that some action is better than none since your obligation to pay won't go away.

Tax Planning Tips
Staying on top of your tax situation can help you avoid being hit with a surprise bill when it's time to file your return. Talking to a financial advisor about how to minimize your tax liability can ensure that you're paying enough to stay in favor with the IRS, without paying more than you need to. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now.
The simplest way to avoid IRS tax penalties and interest is to pay what you owe by the filing deadline. If you don't have cash readily available to pay, you might consider getting a personal loan to pay instead.

IRS Fresh Start: Tax Repayment Options | SmartAsset
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Thank you.
 
Julia2024 said:
Actually it was my divorce attorney who advised me to file the Innocent Spouse and I did it myself. This was the only form of relief that I filed with the IRS. Should I try filing "Publication 971"?
Click to expand...

Publication 971 simply provides you the information on the three different forms of relief: innocent spouse, separation of liability, and equitable relief. It will help you determine which of those is most appropriate at this point and what you need to do to apply. If the returns involved were filed more than two years ago, look particularly at the equitable relief section of the publication because equitable relief is not subject to two limitation period of the other two kinds of relief.

Jack's information, while good for someone trying to get a handle on taxes they owe but cannot afford to pay, is something you'd only need to look at if you can get the IRS to relieve you of the tax that came from your ex-husband's business through one of the three methods of spousal relief covered in Publication 971.
 
Tax Counsel said:
Publication 971 simply provides you the information on the three different forms of relief: innocent spouse, separation of liability, and equitable relief. It will help you determine which of those is most appropriate at this point and what you need to do to apply. If the returns involved were filed more than two years ago, look particularly at the equitable relief section of the publication because equitable relief is not subject to two limitation period of the other two kinds of relief.

Jack's information, while good for someone trying to get a handle on taxes they owe but cannot afford to pay, is something you'd only need to look at if you can get the IRS to relieve you of the tax that came from your ex-husband's business through one of the three methods of spousal relief covered in Publication 971.
Click to expand...
Thank you very much! I will look into the "equitable relief" option as since the returns involved do go back to 2013, although I believe I just filed a return last year. My accountant advised to not file returns for a couple years when I first realized the IRS was taking all of them. I appreciate the information!
 
Julia2024 said:
My accountant advised to not file returns for a couple years when I first realized the IRS was taking all of them. I appreciate the information!
Click to expand...
Whaaaatttt?
If you're required to file returns, file the returns. A much smarter way to avoid having your refunds (not "returns) intercepted would be to adjust your withholdings so that you have very little (if any) refund coming to you.
 
Julia2024 said:
Thank you very much! I will look into the "equitable relief" option as since the returns involved do go back to 2013, although I believe I just filed a return last year. My accountant advised to not file returns for a couple years when I first realized the IRS was taking all of them. I appreciate the information!
Click to expand...

That advice from the accountant concerns me. Is the accountant a tax accountant, as in having a master's degree in tax and/or extensive experience in tax? When you expect to get a refund, you must file the return within three years of the date the return was due or within two years of the date the tax was actually paid, whichever is later. Advice telling you to sit on the returns "for a couple years" risks filing too late to get the refund. Your accountant should have known that, told you about that rule, and made you aware of the date(s) by which you had to file to get the refund.
 
Tax Counsel said:
That advice from the accountant concerns me. Is the accountant a tax accountant, as in having a master's degree in tax and/or extensive experience in tax? When you expect to get a refund, you must file the return within three years of the date the return was due or within two years of the date the tax was actually paid, whichever is later. Advice telling you to sit on the returns "for a couple years" risks filing too late to get the refund. Your accountant should have known that, told you about that rule, and made you aware of the date(s) by which you had to file to get the refund.
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I believe he is a CPA and yes, he advised to wait the max amount of time until you could no longer get a refund (which the IRS is swiping anyway to pay off ex husband's debt). Thank you :)
 
Zigner said:
Whaaaatttt?
If you're required to file returns, file the returns. A much smarter way to avoid having your refunds (not "returns) intercepted would be to adjust your withholdings so that you have very little (if any) refund coming to you.
Click to expand...
Yes, thank you, I have had my employer adjust my withholdings.
 
Hello, unfortunately I lost a prior thread regarding form 971 and I believe some form called Equitable Relief (?) Can someone please refresh my memory? I had tried unsuccessfully to file an Innocent Spouse form 8857 which the IRS had rejected. Thank you!
 

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