Tag Archive for Form 8379

Unpaid Debt Can Take Your Tax Refund

TaxConnections Member Barry Fowler

As the 2015 tax season approaches, you may be getting excited about your potential tax refund.

However, that excitement may be premature if you have outstanding federal or state debts. The Treasury Department’s Bureau of the Fiscal Service (BFS) issues federal tax refunds, and Congress authorizes BFS to reduce your refund through its Treasury Offset Program (TOP) to pay:

• Past-due child and parent support;

• Federal agency non-tax debts;  Read more

Is The IRS Withholding Some or All of Your Refund?

Barry Fowler6

If the IRS kept all or a portion of the federal refund you were expecting, it may be because you owe money for certain delinquent debts. If that is true, the IRS or the Department of Treasury’s Bureau of the Fiscal Service (BFS), which issues IRS tax refunds, can offset or reduce your federal tax refund or withhold the entire amount to satisfy the debt.

Here are some important facts you should know about tax refund offsets:

1. If you owe federal or state income taxes your refund will be offset to pay those tax liabilities. If you had other debt such as child support or student loan debt that was submitted for offset, BFS will take as much of your refund as is needed to pay off the debt, and send it to the agency authorized to collect the debt. Any portion of your refund Read more

Injured Spouse Allocation

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Many married taxpayers choose to file a joint tax return because of the benefits to be derived from this filing status. On a joint return, both taxpayers are jointly and individually responsible for the tax and any interest or penalty due on the return, even if they later divorce. This is true even if a divorce decree should state that your former spouse will be solely responsible for any amounts due on previously filed joint returns.

The situation can exist, then, where one spouse could be held responsible for all the tax due, even if all the income was earned by the other spouse. In cases like this, the IRS, in the interest of equity may allow a spouse in such a situation to be relieved of the tax, interest, and penalties that are due. Read more

Injured Spouse Relief Is Available

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The terms “innocent spouse” and “injured spouse” are frequently misunderstood. These are two different situations under our current tax code.  A previous blog discussed the concept of an innocent spouse under IRS rules (See Innocent Spouse Relief by John Stancil). An innocent spouse is one who stands has filed a joint return and is exposed to liability for additional taxes due to fraudulent activity on the part of the other spouse.  An injured spouse is someone whose refund is captured by the IRS to satisfy a debt owed by the other spouse.  An injured spouse claim, if accepted by the IRS, can prevent this from happening.  A claim is made by filing Form 8379 with the IRS.

First, some background.  When spouses file joint returns, each spouse is liable for anything that is included on the return.  In addition, there is joint liability for any Read more

Innocent And Injured Spouses – Part 3

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Injured Spouse

An Injured Spouse is a spouse who has had part or all of their refund seized due to the debt owed by the non-injured spouse. In order to qualify as an Injured Spouse a taxpayer must meet the following qualifications:

1. File a joint tax return with the non-injured spouse.
2. Have had, or suspect you will have, part or all of your portion of the refund seized due to the other spouses back debts.
3. Not be obligated to pay the other spouses back debts.
4. Have received income reported on the joint return. Read more

Innocent And Injured Spouses – Part 2

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There are two other situations that fall into the realm of Innocent Spouse, the Separate Spouse election and Equitable Relief.

Under the Separate Spouse election (§ Cod. Sec. 6015(c)) a requesting spouse may elect to be treated as if the joint return had been filed separately. The requesting spouse bears the burden of proof and eligibility requirements are very stringent as follows:

1. At the time of the election the requesting individual is no longer married to or is legally separated from the individual with whom the joint return was filed; or
2. The requesting individual was not a member of the same household as the individual with whom the joint return was filed at anytime in the 12 month period ending on the date Read more

Innocent And Injured Spouses – Part 1

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Spouses being held liable for their partner’s tax liabilities have given rise to two separate and unique types of relief by legislation and the IRS. These are often confused and misunderstood. We will define both Innocent and Injured Spouses, determine how to qualify for the different types of relief, discuss timing options, and review recent legislation and court cases.

When a couple files a joint tax return they are agreeing that everything on that tax return is true and they are responsible for everything on the return. This is known as joint and several liability, (§ Cod. Sec. 6013(d)(3)) which means that both parties are totally responsible for all of the tax liability on the return both together and separately. Read more

“I” is for Innocent / Injured Spouse

TaxConnections Picture - His Hers“I” is for Innocent and Injured Spouse.  The Innocent Spouse program and the Injured Spouse program are similar but different ways for spouses to keep their tax situation separate from each other.  Trust me when I say you don’t want to be involved in these.  It can be a messy, complicated, time consuming process to reach a fair conclusion. It is much better if you don’t need to avail yourself of the Innocent or Injured Spouse provisions. The next post is “J for Joint Liability”; I suggest you read that one as well.

Innocent Spouse relief is when one spouse thinks they should be absolved of the joint tax liability.  These are extreme situations and many times involve an ugly divorce.  One example the Internal Revenue Service gives is a couple files a return owing $5,000 then get divorced.  The tax bill wasn’t paid and part of the divorce declares the spouses will split the tax.  If one spouse gives the other $2,500 but the other spouse never remits anything to the IRS, this would be a situation where the spouse who did provide their $2,500 should be allowed to be released from the tax debt.  Most situations are much trickier and difficult on both parties.  It can take months or years to get it resolved, but it does provide at least the chance to make things right.

Injured Spouse Relief is a much easier concept to understand and to implement.  If one spouse has prior tax debts or child support liabilities, there are two ways to keep the current year taxes separate.  The couple can file two separate returns but that is normally a tax disadvantage and more work, so enter the Injured Spouse Relief.  If you include Form 8379 with a joint return, the IRS calculates the current year refund for each spouse.  Instead of a joint refund of $8,000 all being taken by the IRS and applied to prior liabilities for one spouse, Form 8379 allows the IRS to calculate the refund attributable to each spouse.  If the spouse with no outstanding liabilities would have a refund based on their own income and their own payments, that spouse will receive a check for their portion of the refund while the remainder is applied against the one spouse’s prior liabilities. Read more