Collections in divorce - community property state

Technical topics regarding tax preparation.
#1
kathyt  
Posts:
445
Joined:
21-Apr-2014 7:42am
Location:
Lake Charles, LA
2013 client owed 68,000 on a joint return. After the return was filed, they divorced and the wife filed for and received Equitable Relief. I represented the husband and we appealed that as she did not qualify - and we won the appeal, she was denied relief. Flashforward to today - the client told me he is still paying this on an installment - and thought it should be paid off by now so I pulled the 1040 Account transcript and it shows this:

Innocent spouse claim received
Transfer account out 11-23-2015 $-20,069.56
Transfer account in 11-23-2015 $ 20,069.56
Balance transferred to split liability account -20,069.56

The 1040 account transcript shows a balance due of zero, but there is another Account transcript for the 1040 Separate Account that shows the same as above except for the last night (balance transfer), and that transcript shows a balance due of around 18,000.

The rest of it shows monthly payments from that time until now. We won the appeal in Feb 2017 - but that doesn't show up anywhere - it appears he is still paying all of the tax. She filed for relief in 2015 and the appeal was won in 2017.

It appears he is still paying in installments for her share of the tax. He tells me that she has the ability to pay her share - what can I do with this? I don't really see the point of winning the appeal if he still has to pay all of the tax.
 

#2
Posts:
1362
Joined:
22-Apr-2014 9:07am
Location:
Chicago, IL
I had a situation similar to this but without the relief and appeals, not sure if it will help you at all but happy to share.

MFJ in 2014 owed about $50,000. After divorce in 2017 the IRS setup "mirrored" accounts for each of them...meaning that they were jointly and severally liable for the entire balance. As one person paid down the debt it went down on both accounts. But the IRS can still collect any amount from either party until the balance is zero. If your client is making IA payments that will settle the debt then the IRS has no reason to after the ex.

Not sure there's much your or your client can do other than possibly stop paying on the IA and let the IRS go after both of them again. Perhaps that will get the ex to do something?
 


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