Love conquers all, I guess.

[DaveO]

Long time client brings in new boyfriend for multi year tax prep. He is self-employed in a family owned business. Should have been treated as an employee but that's another story.

Records range from sloppy and incomplete to non-exsitant. Returns are prepared with total tax due of around $40k with P&I adding another $15k or so. No way boyfriend can pay the money he owns a pickup with about $2k equity and a few hundred dollars of tools. Advise him to seek a W-2 job to cut his future SE tax liability which he does.

Advise client not to marry boyfriend until tax problems are resolved. As you would guess the happy couple show up for tax appointments happily married. We file them MFS for 2008.

The problem now is moving ahead with boyfriend now husbands tax problems. Since none of the tax liability is her problem do I need to include her information on the 433-a or in OIC should we get that far? I know seperate a OIC can be filed for each spouse but will they allow his to be considered without her income?

[Snaggletoof]

Separate Returns

If wife can (somehow) get a refund by filing a separate return, I would advise her to do so. Don't know that in a civil matter this takes her off the hook, but I would get my refund if I were her. Working together, it would be hard to them to get considered for OIC, and I don't think filling out the 433 with only one household income would be proper.

I know the overall tax situation is not going to be helped by both parties filing separate, in fact we all know this can most likely INCREASE your taxes. I'm simply responding to your client relationship and your obligation, and think you should at least mention the possibility of filing separately.

Your post title says it best: "Love conquers All." Another famous quote, is "When the wolf knocks at the door, love flies out the window..."

[DaveO]

Thanks, Snag Love the quote.

We did file them seperate. He had a modest balance due and so did she. We just wanted to protect her bank account from levy for his current year taxes since she has always paid her taxes.

My concern is going forward with an OIC. Will the IRS even look at it without both incomes present? It's not that she makes much money or owns anything of great value other than some money in an IRA, it's just a matter of fainess to her since she created no part of the debt.

[JohnH]

Maybe he will be as effective in charming the IRS as he's been in charming her.

[Earl]

Also interested in this. Would her assets be considered when filing for offer in compromise. Consenus appears that her income must be included but I am wondering if her assets must also be included.

[ChEAr$]

Yes

An offer in compromise must take into account household income.

However, consider, just what kind of "offer" can he make? With little assets, there's nothing TO offer.

[geekgirldany]

Could probably do an Injured Spouse so they can do MFJ and if they get a possible refund.

Not sure on the OIC.

[DaveO]

I was in a Liason Seminar today and got the name and email of the District Appeals Manager. I will email him with a detailed question since the Form 656 will probably land on his dest at some point in time anyway and I'd just as soon have it right from day one.

Yes, her income must be included but only his expenses are to be. Not sure of her assets but am thinking not. Big question is when I figure expenses do I take the standard allowance for a two person household and split that for Food & Misc and out of pocket medical?

I'll post back what he replies with.

I spoke with the OIC specialist in the IRS Appeals office. He confirmed the following.
1. All household income is included.
2. Only the assets of the responsible spouse are listed.
3. The total household expenses for the household are listed but may be allocated between spouses based on income on an attached schedule.
4. Only the available credit of the responsible spouse is listed.
5. The assets, equity and available credit of the innocent spouse may not be used in calculating the acceptable offer.