Couple divorced in 2021 - but return in question is for the 2020 year. WA State (community property state). Husband has only income (w2 wages). Two children.
When final divorce agreement happened in 2021, the 2020 return was unfiled still - and the divorce agreement states when the 2020 return is filed, the entirety of the refund ($11k) is to be refunded directly to the wife by the IRS, and that half of that amount shall be credited towards the husband's child support in arrears.
Tax return is then filed for 2020. Wife receives only half of the $11k --- the other half gets levied and paid to the Child Support Enforcement Agency. The CSE agency informs wife that they will hold the funds for 180 days and that she needs to file Form 8379 as Injured Spouse in order to get the other half of the funds. Wife comes to me for assistance.
Admittedly, have not worked with Form 8379 much before. As i work through the instructions, here are my questions:
1) Form 8379 allocates income / credits / withholdings between spouses as if they are filing MFS -- this concerns me because without knowledge of the divorce agreement, the IRS would then allocate all income and withholdings over to the Husband, including the Earned income Credit (very large part of the refund), which means that the wife will never actually see the 2nd half of the refund??? Am I understanding this correctly?
2) I read that Form 8379 and community property states (WA State) don't play well together - I'm concerned that the CSE only holds funds for 180 days, but that the process of the 8379 plays out for much longer. Anyone have any inisght here?
Thanks in advance!