Installment agreement MFS and MFJ years

Technical topics regarding tax preparation.
#1
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I have a couple who is married and have an installment agreement for a married filing joint year with a balance of about $40,000. For 2014 they decided to do married filling separately because the wife wanted to separate her self from his liability. The husband is the one who has not been doing enough withholding. The husband has a balance due of about $6,000 for 2014 that he can not pay in full.

Can we set up an installment agreement for his 2014 year so that she is not held liable for his 2014 taxes and still keep the prior year installment agreement? When I spoke to the IRS regarding this they were telling me there is not a way to do that but I did not think that sounded correct.
 

#2
ATSMAN  
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Are you saying the IRS told you that on a MFS return for 2014 the wife will be responsible for any balance due on the husband's return? Does not agree with the law.
As you know that the installment agreement for the MFJ years both spouses are jointly and severally liable.

Why doesn't the husband apply for installment agreement on the MFS return when the deficiency notice comes?
 

#3
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The IRS told me that for him to do an installment agreement for the 2014 year it would need to be lumped in with the MFJ installment agreement. This sounds like the MFS debt is now being tied to her if it is on the same installment agreement.
 

#4
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porterj5 wrote:Can we set up an installment agreement for his 2014 year so that she is not held liable for his 2014 taxes and still keep the prior year installment agreement?

This is a very interesting question. What the IRS rep probably meant was that any installment agreement must cover the entire debt; they never allow different agreements for different years. Furthermore, after default (non-payment of 2014 balance due), Form 9465 asks whether they share household expenses. So it sounds like IRS will not let them isolate the MFS liability for this purpose.

On the other hand, consider that after divorce IRS will set up a separate installment agreement even if the liability is from a joint return. Of course in that case each installment agreement must cover the entire liability, while this couple wants separate installment agreements without double payments.

Well, what difference does it make anyway? They can arrange proportional payments between themselves; IRS will apply any payments to the oldest debt. So if they default again she still isn't liable for the $6000, and he just can't pay that off without paying her MFJ liability first.
 

#5
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4Seasons, could you offer some insight into this scenario?

We set everything up under one installment agreement and the MFJ balance is paid off over time till the MFS balance is left. He then defaults on the installment agreement. Will the IRS try to collect from both parties or just him?

I would think it they could only collect from him but if they were both set up on the installment agreement I am worried they will try to collect from her as well.
 

#6
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porterj5 wrote:I am worried they will try to collect from her as well.

Of course they will--so what?
 

#7
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porterj5 wrote:if they were both set up on the installment agreement I am worried they will try to collect from her as well.

If she is worried, she can deal with Collections separately. She is in default now, so she needs a new agreement anyway. I'll bet properly handled she could get the same agreement reinstated for herself alone. Presumably it would be based on the same household income as before, so payments would be the same. IRS would continue additional Collection efforts against him, including a levy on his apparently high wages since of course she would provide full details, but anything collected would be posted to the joint liability. Would that allay her worries?
 

#8
TaxCut  
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Similar situation.

Client files as MFS for 2021 and sets up an installment agreement. No other balance dues from prior years.

IRS sends notice accepting the installment agreement with both names. Client wants nothing to do with ex so it bothers him to see her name on the notice.

I would think it should be his name only. It would be concerning if tables were turned and it was clients ex that owed but his name showed up on the notice too.

Any thoughts on that?
 

#9
sjrcpa  
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It's wrong. I'd try to get it changed.
 

#10
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I suppose it's a matter of style, but I'd do nothing at this point unless the clients insisted. It's not a joint installment agreement unless both sign. It's not a problem unless the IRS sends a default notice to the non-signer, and that should be easy to correct at that time via a simple letter saying the TP did not sign.
Steve
 

#11
TaxCut  
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I think in this case the ex should be the one who should be concerned since it would seem she's liable for half the liability.

I think my client just hates the thought of seeing her name on the letter.

I guess I'll see if he wants to pursue removing her name.

Thanks for the input.
 


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