Divorce and estimates paid...got a problem!

[Connie]

I have a client trying to file her 2004 taxes. Her ex-husband has refused to give her a copy of his 2004 return. Her attorney has also been unable to get a copy. They had an overpayment on the 2003 returns. Some of the overpayment was due to the ex paying the estimates from his business account. Is she entitled to half of the overpayment? Thanks for your assistance.

[veritas]

If they filed a joint extimated tax declaration (and they probably did) then she should get half. As a matter of practice if preparing estimated tax declarations and I know a divorce is being discussed I do not complete with the spouse's name who is not paying.

I have asked Lacerte to give us the ability to prepare estimated tax declarations in the name of one spouse.

[Connie]

If they filed a joint extimated tax declaration (and they probably did) then she should get half. As a matter of practice if preparing estimated tax declarations and I know a divorce is being discussed I do not complete with the spouse's name who is not paying.

I have asked Lacerte to give us the ability to prepare estimated tax declarations in the name of one spouse.

Now what if her husband did not indicate whether her name was on the formes he filed or not? Will the IRS give that information to my taxpayer?

[veritas]

Do you have a power of attorney for 2004 & 2005? If yes you can call and get a transcript for both years. If you are signed up with e-services you can go online and look for yourself in a matter of minutes.

[S T]

Divorce Issue

Connie, Seems like this is a divorce issue not a tax issue.

I would probably file your t/p's 2004 and 2005 tax returns and not indicate the overpayment from 2003 or consider any estimated payments for 2004 that might have been made.

Your t/p needs to have her attorney demand to see the ex-spouse 2004 return or provide info on the refund or overpayment from 2003, and any estimted payments that might have been recorded in joint names and then make that part of the property settlement.

If estimated payments were made for 2004 in "joint names" then your t/p can claim a portion based on her tax liability, but in reality, the ex has probably already claimed them in full if and when he filed his 2004 tax return. If he has filed 2004 I doubt you would be able to have IRS change the accounting records on their end.

You should obtain a 2848 on your taxpayer and file with IRS and what ever the appropriate form is with your State. It is possible you might be able to access the prior records but then again maybe not as you won't have HIS power of attorney signature.

Good Luck,

Sandy

[Snaggletooth]

Prescribed Formula

Connie, there is a prescribed formula for this, blessed off by the IRS, and believe it or not, quite fair.

Each spouse computes income and expenses as if they were filing a separate return. Items paid or received jointly such that neither spouse can be identified with the income/expense is split 50-50. This treatment continues line-by-line all the way down the 1040 until you calculate the tax. The tax on each split return is computed as Married Filing Separate. The tax and credits and "other" taxes continue down the form until there are two separate and distinct tax liabilities.

The "Real" tax (married and joint as filed) is then split between the spouses in the ratio of the two separate taxes calculated in the paragraph above. This "allocated" tax is then compared to the payments of each party to compute a separate refund or amount due from each party.

A few things to remember -- the combined tax liability cannot be less than the original liability filed, and the combined payments cannot be greater than the actual payments made. These two requirements are absolute and cannot be netted out.

The "married filing separate" mock return means that neither spouse is guaranteed their standard deduction available to MFS taxpayers. If the original return had itemized deductions, then the total deductions must be split between the taxpayers, even if one of them does not reach the standard deduction.

"Married filing separate" also plays havoc with EIC, if any.

Your specific question about Estimated Payments? should go to the party actually making the payments, ALTHOUGH if they paid and enclosed a coupon with both names, and the money was paid out of a joint account, it would be difficult to prove the payments as being anything other than 50-50.

With power of attorney, you can get a copy of the return from the IRS for a nominal fee. Probably lots easier than trying to wrest this copy from the other spouse.

I went through a grisly divorce with two clients in 2004 and, against the advice of everyone on this board, represented both parties. Not fun, and not sure whether I will do it again.

[S T]

Will that work

Snags,

Will trying to file a 2848 POA in only one name and SSN work to obtain the tax return on a joint filing?

I would worry about the ex already claiming the overpayment from 2003 on his "own" 2004 return that is supposed to have been filed and also claiming any subsequent "joint ES payments" either for 2004 or 2005.

Connie's t/p is JUST now filing a 2004 return.

Sandy

[Armando Beaujolais]

I agree with Sandy, it's a divorce issue, not a filing issue. I'd expect the IRS would treat the refund just like they treat a balance due. They'll collect it from whoever is easiest to collect it from. I'd expect they'll issue the refund to the first SS number on the return if that person files for it.

The IRS likes to stay far away from divorce / separation issues. This would appear to be more along the lines of lawyer-driven property settlement than a manner-of-filing issue.

[DaveO]

Does your clinet qualify to file as HOH? If not I think I would prepare a MFS return using the ex's name and SSN and let the IRS sort it out if he filed as anything other than MFS.

[Connie]

Notice already received....

I contacted the tp and she said she has now received a notice that she has not filed her 2004 return. Now the pressure is on. She said her husband most likely...hoping there...filed MFS. They were not living together for most of 2004, but were still married.
I would say he probably did file MFS since she did get the notice in her name alone.

The balance credited forward from the 2003 federal return is over $109,000.00 and also $13,750.00 on the state return. A little shocking to see that type of overpayment to me... This does make quite a difference to her and she does owe taxes to the state without part of the overpayment.

They were married in 2003 when that return was filed. She did say her husband did pay the estimates from his separate account....I took that to be his business account. If her name was not necessarily part of the business. The husband's business is a Sub S.

What a mess, huh?

Thanks for your assistance!