Cryptic IRS Conversation

[Snaggletooth]

A client and her husband took a $7500 FTHC in 2008, and then divorced.

IRS is coming after her big time after sending numerous notices to her ex-husband, who ignored them. Someone in the IRS apparently found out she ended up with the house in the divorce. In fact, she began paying back the $500 installment in 2010.

She called IRS to find out what was going on. The representative indicated that the amount she owed did in fact stem from the $7500 FTHBC. BUT THEN told her that she was not permitted to disclose any further information about it.

Why would the IRS intentionally withhold information which would support money they are trying to collect?

Client has no idea. Disallowed by audit? Disallowed by fraud? Disallowed by statute?
If disallowed, does her ex-husband owe half of the money? (Remember he is off-the-hook for the recapture, which is not the same as a disallowance).

Buncha questions. Answer as many as you care to...

[David1980]

She called the IRS. Have you gotten a POA and called the IRS on her behalf yet? I find when taxpayers call the IRS, it's not always a matter of the IRS not giving the necessary info but rather a "lost in translation" between IRS, taxpayer, and myself. I'd get a POA and call the IRS myself.

[Snaggletooth]

Yes, But

Yes the POA is in progress. And yes, people lose the handle on information really quick when they discuss with IRS - in fact, they lose the handle even when talking with me!

But a statement that "we are not permitted to disclose any more information" is hard to misinterpret.

I wonder if IRS is avoiding getting involved in a marital issue, yet are insisting on collecting the money. Or whether there are prohibitions on discussing fraud over the phone, etc.

[JohnH]

I'd call the IRS and conference the client in on the call so the client can give instant permission for you to obtain info. Doesn't replace getting the POA in place, but speeds up the process.

You will know better than the client what to ask, and much of the uncertainty will probably be cleared up immediately. I've made calls like this in the past and was able to essentially dispense with the problem on the phone, before a POA even had time to make it through the system. If nothing else, the call enables you to begin thinking about the actual facts rather than the client's interpretation of the facts,.

[David1980]

Yes the POA is in progress. And yes, people lose the handle on information really quick when they discuss with IRS - in fact, they lose the handle even when talking with me!

But a statement that "we are not permitted to disclose any more information" is hard to misinterpret.

I wonder if IRS is avoiding getting involved in a marital issue, yet are insisting on collecting the money. Or whether there are prohibitions on discussing fraud over the phone, etc.

Well it could be the taxpayer asked something with regards to the notices sent to her ex-husband, which naturally they wouldn't be able to disclose that information. Instead of asking for details on her own liability. Something like that, maybe?

[ChEAr$]

Well, DUH! the FTHB credit in 2008 was due to start to be repaid in 2010, remember?

And since they filed a joint return for that year (right?) either party is fair game.

Now Snaggle, you owe me a drink on Sunday.

[Peachie]

Hi there,

Well, DUH! the FTHB credit in 2008 was due to start to be repaid in 2010, remember?

And since they filed a joint return for that year (right?) either party is fair game.

Now Snaggle, you owe me a drink on Sunday.

Snags said she began making payments of $500 in 2010. Did you miss that? :-)).

[taxea]

Yes the POA is in progress. And yes, people lose the handle on information really quick when they discuss with IRS - in fact, they lose the handle even when talking with me!

But a statement that "we are not permitted to disclose any more information" is hard to misinterpret.

I wonder if IRS is avoiding getting involved in a marital issue, yet are insisting on collecting the money. Or whether there are prohibitions on discussing fraud over the phone, etc.

I think IRS didn't disclose further because "she called the IRS" and they had no way of verifying whether she was the person entitled to receive information on a MFJ return. Spouse is the primary on the return and therefore the likely person they sent all quiries too, however, I question that she did not get any of the correspondence the IRS was sending since she got the house. They tend to send two copies, one to each spouse when a POA is in effect...I would think they would do the same thing without a POA.

[Snaggletooth]

Juicy One

Thanks folks. This is going to be a juicy one with all manner of sensationalism. When the dust settles, I'll keep everyone informed as much as I can without breaching confidentiality.

[JohnH]

It's been my experience that IRS will discuss anything on a joint return with either party, once that person has properly identified themselves. So I don't believe the idea of "primary spouse" explains their reluctance to speak with the taxpayer in this situation. (Assuming the client understood them correctly in the first place, which is still an open question)

Here's another possibility. About 2 months ago, IRS sent out thousands of notices to people who were legally entitled to claim the $7,500 FTHB credit, saying that they did not qualify. IRS eventually caught their error and are in the process of cleaning up the mess. I remember this because the only return I prepared claiming this credit got snagged in this error. It took a couple of phone calls (again no POA needed), and the problem was rectified.

Check this out: http://www.irs.gov/newsroom/article/...237695,00.html

Part of what I gathered is that the IRS computers are looking for $250 each year under each Social Security number that appeared on the 2008 return. If so, then the path of least resistance might be for the ex-husband to pay his part of the repayment amount each year and the ex-wife to reimburse him his $250. (Wonder what the chances are of that happening?)

The more I ponder this, the more I begin to think that this may be the very reason IRS is reluctant to discuss the entire issue with her - they can't give her the simple response that she paid too much and he didn't pay his part (according to what their computer expects). A caredully-worded question on the phone with IRS might just flush this out if it is the problem.

Maybe you have a client with whom you'll have the honor of going through this entire drill annually for the next 15 years....

[ChEAr$]

Snags said she began making payments of $500 in 2010. Did you miss that? :-)).

Naw, but I guess I just couldn't understand the woman's problem. My point was that she is on the hook. If she has any beef with that, she can bring an action against her ex for his share of it.

[ChEAr$]

I think IRS didn't disclose further because "she called the IRS" and they had no way of verifying whether she was the person entitled to receive information on a MFJ return. Spouse is the primary on the return and therefore the likely person they sent all quiries too, however, I question that she did not get any of the correspondence the IRS was sending since she got the house. They tend to send two copies, one to each spouse when a POA is in effect...I would think they would do the same thing without a POA.

Actually the practice at IRS these days is to send two letters,one to each in case of a joint return, whether or not still married.

One client brought me the two separate letters and thought IRS wanted to collect doubly.

[Snaggletooth]

Pabst Blue Ribbon

Now Snaggle, you owe me a drink on Sunday.

Yeh, I know. All I afford is a PBR.

Peachie is different. While you and I suffer through a PBR, if she shows up, she gets Harveys' Bristol Creme Sherry...

[ChEAr$]

Yeh, I know. All I afford is a PBR.

Peachie is different. While you and I suffer through a PBR, if she shows up, she gets Harveys' Bristol Creme Sherry...

OH. I would have thought a peach brandy for a Georgia peach.