Beat up Ex-Spouse

[ATSMAN]

Does the ex wife meet these conditions to qualify for "innocent spouse relief":

You establish that at the time you signed the joint return you did not know, and had no reason to know, that there was an understatement of tax and Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax

If, at the time you signed the joint return, you had actual knowledge of the item that gave rise to the understatement of tax, you do not qualify for separation of liability relief.

If she likes to roll the dice and take a chance, go for it. If she gets snared you will be spending a lot of time (possibly uncompensated) trying to get her out of that jam. Is it worth it? Only you can decide.

[Corduroy Frog]

Stress the original issue

Thanks to all who have posted. The overwhelming conversation has been about the horrendous possibilities of joint liability, and I do acknowledge what can happen.

The real issue, however, is the likelihood of relief under the innocent spouse provision. From the respondants above, we know XW can file for relief, and that relief is not guaranteed. Do we know any more about the likelihood of relief if XW has no allocable income and no tax liability other than what may arise from the joint and several nature of the MFS return?

For example, are her chances of relief extremely likely, extremely unlikely, conditionally unlikely, etc? There may not be many of us who have experience enough to address this, but I would appreciate any discussion.

[ATSMAN]

Whiteoleander you hit the nail on the head! I would dread getting in the middle of it when you know what hits the fan!

[WhiteOleander]

I would warn her that if the ex husband walks the debt or not, the IRS will come after her for the money. If she gets EIC, that will go for the debt until it's paid. Any refund she receives, will go to pay his debt. And I would bet that will be a much larger sum to lose than a reduction in child support. There is absolutely no way to know if the IRS will accept the innocent spouse claim. But, this case could be hard to prove since they are currently divorced. (at least that is my assumption based on the OP). The sum total of the benefit comes down on the side of the EH with no real benefit to the EW. She will be assuming a headache she may not want. What if he is "Cheater of the Year". She gets drug into it with him. What's her benefit?

[Corduroy Frog]

Happens All the Time

How can child support be reduced by one of the parents tax bill? At least it my state it is pretty much formula driven based on the income and certain allowances. I don't recall that a tax bill was one of them.

Speaking only for Tennessee, there is an eternal provision for "changed conditions". The courts will re-award a greater or lesser amount depending on circumstances which did not exist at the time of a previous award. The unforeseen requirement, for example, for either party to have to pay $500/month to IRS changes conditions one way or another for people at most common income levels.

The change has to be substantial because:
1) The expense of a lawyer has to be justified to petition the court.
2) If it's not substantial the court will ignore it.

[ATSMAN]

Thanks Roland. As you might imagine, this is a nasty issue between two ex-spouses, and if XH has to pay a bunch more, then he's going to reduce child support. XW doesn't want that to happen, but is afraid to sign a joint return. I've had to listen to dozens of slinging arguments between the two, but they aren't relevant to the question.

Discussing with lawyers is giving this couple too much credit. Everytime they talk to a lawyer it costs them money. Another session with these two and I'm going to walk away.

From what I've read, if IRS comes after XW, she can file Innocent Spouse, but the question is whether IRS will honor this given the fact that she knew the liability to begin with. If IRS allocates income she won't owe anything...

Thanks for all responses.

Be cautious! If you give the wrong advice this may come back to haunt you. How can child support be reduced by one of the parents tax bill? At least it my state it is pretty much formula driven based on the income and certain allowances. I don't recall that a tax bill was one of them.

[Corduroy Frog]

Thanks Roland

Thanks Roland. As you might imagine, this is a nasty issue between two ex-spouses, and if XH has to pay a bunch more, then he's going to reduce child support. XW doesn't want that to happen, but is afraid to sign a joint return. I've had to listen to dozens of slinging arguments between the two, but they aren't relevant to the question.

Discussing with lawyers is giving this couple too much credit. Everytime they talk to a lawyer it costs them money. Another session with these two and I'm going to walk away.

From what I've read, if IRS comes after XW, she can file Innocent Spouse, but the question is whether IRS will honor this given the fact that she knew the liability to begin with. If IRS allocates income she won't owe anything...

Thanks for all responses.

[Roland Slugg]

How can Mrs. XW avoid joint liability on a MFJ return?

Well, I don't think she can avoid joint liability, but she can always apply for Innocent Spouse Relief by filing F-8857. Is she asking you for advice here? Your post says she has agreed to file a MFJ return, so I assume she has conferred with her lawyer and wants to do this.

[ATSMAN]

If I was the Mrs XW's tax adviser I would strongly recommend against filing MFJ for a prior year and also advise her that she may want to discuss the matter with her attorney because as I understand it at the divorce mediation/proceedings the tax issue had to be discussed to finalize the divorce.

[Kram BergGold]

She Can't

She Can't . Not much else to say.

[Corduroy Frog]

Mr. XH and Mrs. XW are contemplating filing a prior year tax return. Mr. XH makes a substantial amount of income and Mrs. XW makes virtually nothing. Mrs. XW is agreeing to a MFJ return only in an attempt to save several thousand $ for Mr. XH, who will have to file married and separate otherwise.

How can Mrs. XW avoid joint liability on a MFJ return if she knows the facts prior to signing the joint return? (Example, innocent/injured spouse)