Spousal Protection Programs!

Q: Despite our pre-nups, the IRS took our joint refund because of Kitty’s pre-marriage debts.  Am I an “injured spouse” or an “innocent spouse”? The monarchy is dying and I am royally flushed.
-Prince Billy
A: Billy, there is hope for you and the royals after all, if you are filing a Yankee tax return. The IRS allows an “injured spouse” to protect or recover part of a refund that has been subject to “offset.”
You must submit Form 8379 — “Injured Spouse Allocation” — as part of the tax return you file, or after it has been filed and your long-expected joint refund has been taken to satisfy government/government-related debts of one spouse. Examples include defaulted student loans, a pre-marriage tax debt  and child support (from your spouse’s prior marriage). There is a six year statute of limitations for a non-tax debt and a three year statute on a tax debt.

 Now the devil is in the details, Bill. The IRS Form 8379 requires that you allocate all items on your tax  return between you and Kitty. The wages and withholdings are straightforward but who gets George and who claims Charlotte? Who claims the Palace at Westminster? There’s a juicy credit for Queen Liz’s babysitting duties — who claims?

Oh yeah ,and if you live in one of those many “community property states” then special rules apply.

(My Taxes for Makers talk at Artisan’s Asylum in Somerville has been rescheduled for June 4. Click here for details.)

Q:   I don’t have nearly the net worth of  Kitty and Billy, but apparently my husband Tom Friday cheated on me.  Deflated his football income.Can I get my quarter back?

-Michelle Bunchmen, Boxborough, Mass.

A: Michelle –  it is hard being the working spouse of a celebrity, especially one who is no help to the kids on weekends.  Innocent Spouse is more complex than Injured Spouse. Where Injured Spouse is simply an allocation of liability, Innocent Spouse connotes that one of the parties did not actually know, and have reason to know, that there was a tax deficiency solely attributable to your spouse’s misreporting of income or expense on a return that you filed jointly.

One can file for innocent spouse relief via IRS Form 8857, but there is more judgement by the IRS required and they are required to contact the “non-requesting spouse” (or ex- spouse) and give them an opportunity to be part of the process. (No issues there–we know Friday loves being investigated!)   But even if you do not qualify for “classic” Innocent Spouse Relief you may qualify for “lesser known remedies and still obtain some tax relief — “Relief by Separation of Liability” and “Equitable Relief.” The IRS suggests that you “not delay filing because you do not (yet) have (all) the required documentation”; there is a complex statute of limitations that may apply.Yes, we can help you make sense of all this, Elizabeth Taylor, and administer the right remedy (no harmful drug interactions!) E-mail me.

Starting a business? Click here to view my recent presentation for Social Enterprise Greenhouse.

Since it’s your birthday this week, what were the circumstances of your birth?
Gossip by the Numbers, Galillee  


First, my mother had to move me up a week because of a family wedding. Then — so I was told years later — my father was about to get in the car when someone noticed that his baby had a pink bonnet.  He ran back inside and found a nurse with a blue-bonnet-ed baby (me) frantically looking to place him with the right family. (I’ll let you draw your own conclusions).In 1997, when my (already) handsome son Yonah was born, our friends called my Mom to tell her the good news. She was a bit startled and asked “are you sure he is so cute? Rich was pretty ghastly when he was born”. I don’t know, Mum, this guy looks fine to me, although sister Carol was (is) prettier.
Because you asked... (and please, keep asking). 
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