married filing seperately questions

[taxea]

A legal separation is not like a preliminary divorce. It is available to separate for legal purposes if a divorce isn't an option, for example, religious views.

That said, I don't really see the issue here. If she is on the mortgage, her name is on the 1098, even if the spouse's listted first. My ex is still listed first on my mortgage and we've been divorced since 2007. I pay the mortgage and take the deductions. Never had a CP notice. If I do, I'll write a letter (like I've done for many clients) and send in the 1098 showing I'm on the mortgage.

I get the documentation ahead of time and put it in my file. I have it already if the IRS should ask. Less headache for me this way

[taxea]

I am of the opinion that if she has enough deductions to itemize, then she should do it. If people are separated and filing MFS, they usually aren't talking to each other. How is one going to know what the other one is doing? If IRS sends out a letter to the one using the standard deduction, then they will have to make a change on their return. GreatGrandmaRae doesn't know what the spouse is doing. She just has to do what is best for her client.

BUT another scenario is if she was doing returns for both of them. She could not tell spouse that he should itemize. She would just have to ask him questions to see if he could or wanted to but she couldn't tell him that he had to. Violation of privacy of wife. That could be a bummer.

Linda, EA

You are absolutely correct. You could say " when filing MFS it is usually a good idea to itemize to avoid a letter from the IRS in case your spouse has decided to itemize and the two of you are not on cordial terms.

[Black Bart]

Another salient point

Like most of you, I have encountered this problem over the years. Mostly, unsure and/or unknowing of what the spouse did, we (my client and I) have filed to our best advantage. And...the few times that I ever found out what the other half did, when contrary to my client's position, no one was ever audited or received a letter.

The point being (unless things have changed recently) that nobody at IRS seems to be minding the store on this issue and they don't pay any attention to it.

Any other boarders here during your years (or days) of practice aware of letters, audits, etc. arising from this? It would be interesting to know.

[taxea]

"If she is on the mortgage, her name is on the 1098, even if the spouse's listed first." I disagree. I have seen many a 1098 that lists the male first unless the loaner has been advised in writing that the 1098 should be issued to the spouse. Normally whomever is listed first on the mortgage is the SSN that is used on the 1098.

[GreatGrandma Rae]

Married Filing Seperate

I don't think either letter is necessary. She'll have a hard time getting the bank to produce such letters, and there are easier ways to document the facts.

On the surface, bank account statements which show only her name as the account holder are sufficient to show that she is the only account holder. The same statements will show that deposits to that account came from her salary, and that the mortgage and property tax payments were made from that account.

Likewise, a copy of the mortgage note and the deed to the house are sufficient to prove the relevant facts.

She can probably download PDF images of the bank account statements. She can also get an online history of the mortgage account.

She should have paper copies of the mortgage note and the deed in the folder that she received at the closing, back when they bought the house.

If she doesn't have it or can't find it, I would not recommend asking the bank for copies. That will take forever, and the bank will charge fees. She can get copies from the title company, or other agency, that handled the closing. In some areas it is referred to as a closing service. Sometimes it is a law firm. They too can charge a fee, but they may not. And she will be dealing with a local office, instead of some call center at the bank.

The mortgage note and the deed are also available from the county recorder. The documents are public records. Here in Franklin County, Ohio, the documents are available online. And there is no fee.

With all that being said, I would not try to include any of these documents with the return. It is certainly a good idea for your client to have this stuff on file now, instead of scrambling to find it later, if the deductions are challenged by the IRS.

But I don't think you, as the preparer, are required to review these documents. If you have some reason to believe that your client is lying to you, or that she is mistaken, or does not understand your questions, or literally does not know whether she signed the mortgage note, then you have to do some due diligence.

I'm not being facetious. Sometimes an unsophisticated or uneducated taxpayer will get involved in a financial transaction that they do not fully understand. Or they may just forget certain details. It is fairly common, for example, for banks to do a second mortgage where only one spouse signs the note. Many years later, the spouse who did not sign may not remember this.

In your case, if you are confident that you are getting complete and accurate information from your client, I think you can just prepare the return, and make some recommendations about what kind of records your client should have in the event of an audit.

BMK

Thankyou. This is very helpful. I will ask Taxpayer to make copies of Deed and Note for her files which she will keep with her year 2012 Tax file.

[GreatGrandma Rae]

Married Filing Seperate

OP says filed for divorce november, 2011, is divorce final or not? if divorce was final anytime during 2012 that client could file single or head of household (if qualified) and there would be no concern about ex spouse.

Unfortunately, she is still NOT divorced. That will happen during 2013 .

[GreatGrandma Rae]

Married filing Seperate

Taxpayer filed for divorce in 2012 but is not legally divorced as of 12/31/2012. Hopefully,this will happen in 2013

[GreatGrandma Rae]

Married Filing Seperate

If you want an authoritative source for your file take a look at Rev. Rul. 71-268. I don't know if the answer is the same if this involves two people in a community property state but I don't do returns for anyone under those rules so I can't comment.

Thankyou. Will do so...

[GreatGrandma Rae]

Married Filing Seperately

I agree with everything Koss said. Also, was there a legal separation that would cover the first two months of the separation or prelimary divorce papers filed?

No legal Seperation ( documented by the Court). Preliminary divorce papers filed. No action on that because of numerous issues...mainly the spouse is claiming permanent disability and wants full support from taxpayer...in process of getting vocational evaluation....taking place this month, then she moves on to divorce, support, etc.

[GreatGrandma Rae]

Married filing seperately

A legal separation is not like a preliminary divorce. It is available to separate for legal purposes if a divorce isn't an option, for example, religious views.

That said, I don't really see the issue here. If she is on the mortgage, her name is on the 1098, even if the spouse's listed first. My ex is still listed first on my mortgage and we've been divorced since 2007. I pay the mortgage and take the deductions. Never had a CP notice. If I do, I'll write a letter (like I've done for many clients) and send in the 1098 showing I'm on the mortgage.

We agree: legal seperation is not like a preliminary divorce. She will NOT GET a legal seperation. She will get a Divorce. For her the only option is a Divorce.

Thanks for your imput.

[GreatGrandma Rae]

Married filing Seperately

I am of the opinion that if she has enough deductions to itemize, then she should do it. If people are separated and filing MFS, they usually aren't talking to each other. How is one going to know what the other one is doing? If IRS sends out a letter to the one using the standard deduction, then they will have to make a change on their return. GreatGrandmaRae doesn't know what the spouse is doing. She just has to do what is best for her client.

BUT another scenario is if she was doing returns for both of them. She could not tell spouse that he should itemize. She would just have to ask him questions to see if he could or wanted to but she couldn't tell him that he had to. Violation of privacy of wife. That could be a bummer.

Linda, EA

We learned yesterday that spouse called Tax preparer (not me) and told him that he wants to file jointly with taxpayer. Tax preparer prepared their Joint tax returns for all years through 2011 . I will not be preparing the 2012 for the person I refer to as "Taxpayer". We are related and I thought it best for her to have an independent person prepare her return. I am helping her gather all the information for her and doing the preliminary tax research. I am a retired E.A.

Taxpayer told tax preparer( referred to above) that she will NOT file jointly with spouse for 2012..too much liability.

Taxpayer is deciding if she will have a different preparer prepare her 2012 tax return. She will definitely file MFS and probably itemize..
Thanks for your thoughts.

[GreatGrandma Rae]

Married filing seperately

You are absolutely correct. You could say " when filing MFS it is usually a good idea to itemize to avoid a letter from the IRS in case your spouse has decided to itemize and the two of you are not on cordial terms.

I agree with you. Thanks

[GreatGrandma Rae]

Married filing seperately

Like most of you, I have encountered this problem over the years. Mostly, unsure and/or unknowing of what the spouse did, we (my client and I) have filed to our best advantage. And...the few times that I ever found out what the other half did, when contrary to my client's position, no one was ever audited or received a letter.

The point being (unless things have changed recently) that nobody at IRS seems to be minding the store on this issue and they don't pay any attention to it.

Any other boarders here during your years (or days) of practice aware of letters, audits, etc. arising from this? It would be interesting to know.

Your client has been fortunate not to receive a letter. It was my impression that the tax return and 1098 are matched by SSN . I could be wrong. Anyway, spouse's and taxpayer's names are on 1098 but spouse's SSN is reporting #.

[GreatGrandma Rae]

Married filing seperately

1098 shows both names , but spouse's SSN..

[GreatGrandma Rae]

married filing seperately

I agree... I think she should still take the deduction for mtg. interest....she can prove she is on deed and note..She can prove she paid all mortgage payments from her seperate checking account..All deposits to that account are from her Wages..Checking account is in her name only.