PaulTry wrote:

- quote -

Equitable Relief. As others have said, I believe the other
two possibilities require an understatement of tax, and
AFAIK, the returns correctly reported their income.

Phoebe

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Phoebe Roberts, EA wrote:
- quote -

Congratulations on your success! Did your client qualify
under Innocent Spouse, Separation of Liability, or Equitable
Relief?

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Phoebe Roberts, EA wrote:
- quote -

That's a good one and should be an example to us all.

You "did good", Phoebe!

ChEAr$,
Harlan Lunsford, EA n LA

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John D. Goulden wrote:

- quote -

That happened to one of my clients. The wife (no longer a
client) asked me for help, because <Big Chain Tax Outfit
that did her HOH return> gave her a blank stare when she
asked them.

The IRS took her refund in February, she got the paperwork
in (including a copy of the divorce decree and a letter from
her ex saying that the taxes were all his, Form 8857 and
Form 12510) about a week later. She had every penny of her
money back by mid-June.

Big item in her favor: the underpayment was due entirely to
partnership pass-through income in excess of cash
distributed, and she had no involvement with the
partnership. Husband also had a current installment
agreement to pay off the liability.

Phoebe

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PaulTry wrote:
- quote -

Part V - Equitable relief applies specifically to
underpayment situations not addressed in separation of
liabilities. I would try both if the facts and
circumstances warrant. I have had sucess doing this. It is
like penalty abatement, it depends on who looks at the case.
And like chicken soup, it can't hurt.

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Mike Wellman wrote:

- quote -

Without looking anything up I'm fairly confident that
neither innocent spouse or injured spouse rules apply to the
OP's situation.

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Stuart A. Bronstein wrote:

- quote -


The IRS position is they're entitled to everything owed by
the taxpayer.

- quote -

Yes.

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Mike Wellman wrote:
- quote -

Depends on what "these circumstances" are.

Regarding Innocent Spouse Relief, Pub 971 says, in part:

"You must meet all of the following conditions to qualify
for innocent spouse relief.

1) You filed a joint return which has an understatement
of tax due to erroneous items (defined later) of your
spouse (or former spouse)."

The original poster's statement that, "A married couple....
gets behind in their taxes...." sounds more like
underpayment than understatement.

Same underpayment vs. understatement problem regarding
Relief by Separation of Liability. Per Pub 971, "This type
of relief is available only for unpaid liabilities resulting
from understatements of tax."

If the ex-wife doesn't qualify for Innocent Spouse Relief or
Relief by Separation of Liability, she should review the Pub
971 requirements for Equitable Relief.

But in the context presented in the original post, it is
unlikely that she will see her refund.

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Stuart A. Bronstein wrote:
- quote -

Withholding future refunds, in addition to agreed payments,
is a preprinted provision of all Form 433-D Installment
Agreements. So the IRS is not taking more than they are
entitled to, just what the taxpayers agreed to when they
signed the form.

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Stuart A. Bronstein wrote:

- quote -

Darn tootin they can, and do it every day.

ChEAr$,
Harlan

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"Stuart A. Bronstein" <spamtrap[at]lexregia.com> wrote:

- quote -

No, but that's not what IRS is doing. The installment
agreement specifically provides that IRS will retain future
overpayments and apply them to the delinquency. The fact
that payments are current is irrelevant.

--
Phil Marti
Clarksburg, MD

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pleasedontemailme[at]dot.com wrote:
- quote -

Somewhere on here I saw mentioned innocent spouse relief,
that will only work when the wife did not know and had no
reason to know the circumstances that created the tax
debt...It appears here that this is not the case, in that
they were both knowledgeable as to whey the debt came about.
Therefore, as has been stated, the IRS turns a blind eye to
the divorce decree, it appears that the decree is
enforceable by the wife against the husband to get her
monies back and needs to take him to court to get it.

Good Luck

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pleasedontemailme[at]dot.com wrote:
- quote -

With all due respect, Innocent Spouse was changed a few
years ago to provide relief in these circumstances.

Mike Wellman
IRSOS.com

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pleasedontemailme[at]dot.com wrote:

- quote -

Based on the OP's story it doesn't seem to be a problem with
the divorce settlement, but a problem with the IRS taking
more than they are entitled to under the payment
arrangements made with the couple.

Can they do that? Make specific arrangements for accepting
payment, and then go take whatever they can find even if the
taxpayer is holding up his end of the arrangement?

Stu

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"John D. Goulden" <jgoulden[at]okcu.edu> wrote:

- quote -

No

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"John D. Goulden" <jgoulden[at]okcu.edu> wrote:

- quote -

The IRS was not a party to the divorce suit and is not bound
by the divorce agreement. The ex-wife can sue her
ex-husband to recover her refund, but the IRS is highly
unlikely to return it to either of them.

-Crystal

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John D. Goulden wrote:

- quote -

Unlikely. Doesn't sound like there were any innocent spouse
circumstances and, since they both owe the debt, injured
spouse doesn't apply. The payment agreement included a
provision for withholding future refunds. The divorce court
decree doesn't limit the ability to collect a federal tax
debt. She may be able to convince the court to order her ex
to pay her the amount of the refund offset.

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John D. Goulden wrote:

- quote -

She can file for Innocent Spouse Relief using Form 8857.
Meanwhile, she needs to adjust her withholding so that her
refund is near zero in the future until ex pays the tax off.

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John D. Goulden wrote:

- quote -

You're probably thinking that since the divorce decree laid
the burden on him, she's off the hook.

sorry, IRS doesn't see it that way. This debt arose from
joint returns, and as such, they are each jointly and
severally liable.

ChEAr$,
Harlan Lunsford, EA n LA

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John D. Goulden wrote:

- quote -

The IRS is not a party to your divorce "arrangement" and has
acted properly in attaching the ex-wife's refund. Better
planning on her part could have avoided such a large refund
in the first place (they can't take what isn't there). Since
the ex-husband has agreed to pay off the tax debt, perhaps
he can pay her back. Otherwise, she is SOL.

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