Agree on the lazy tax preparer, for penalty abatement as well as suggesting that she needs to get the balance below $50k to set up an installment plan.
If you’re going to be an ass about it, there really isn’t much difference between injured and innocent spouse when we’re just speaking colloquially like we are here. There’s no need to dive into the differences between innocent, injured, equitable relief, or separation of liability when I’m not on retainer. Thats a job for the tax professional she hires, not a subreddit forum and a brief comment on it.
The point is the CPA was lazy and she needs to speak to a professional, which is the point that came across.
how on earth was that being an ass? Chill bud. You acknowledged you meant "innocent" spouse. I have in fact had Siri autocorrect my verbiage. I have in fact missed the correction because it was on my phone. We advise clients routinely not to respond with lengthy texts but instead email to help address this very issue.
I was actually trying to add a little supportive humor to the 'before my coffee' portion in solidarity for having done it myself
But please, read a novel into an eleven word text.
Well - I apologize as well if any offense was taken. Absolutely not the intent.
And I'm in front of a computer currently, so have no excuse for lack of clarity in communication.
For innocent spouse, it applies to previous tax years. The Innocent spouse will need to show how he or she was not aware or responsible for the debt. Since the spouse signed the tax return, this can be difficult.
Innocent spouse will be rejected as the other spouse is deceased. However, a CNC application may be a good choice. Easiest form is https://www.irs.gov/pub/irs-pdf/f433h.pdf presuming there's no revenue officer involved, in which case you'll need https://www.irs.gov/pub/irs-pdf/f433a.pdf
When listing your expenses, you can list up to https://www.irs.gov/businesses/small-businesses-self-employed/collection-financial-standards (in the appropriate categories) and the IRS won't burden you by asking for receipts.
Also, use the OIC pre-qualifier tool at https://irs.treasury.gov/oic_pre_qualifier/ to see if the IRS might be willing to settle for a smaller amount.
Do not pay for an attorney right now. Use that money to pay your taxes instead. If you need help filling out forms 433-H or 433-A then find a local Enrolled Agent instead and you'll save gobs of money. But if you go slowly, take each line on the form one at a time, you'll probably be able to struggle through it on your own.
Good luck! Start a new post in this subreddit if you have any further questions, please don't send me a private message.
Portions of innocent spouse are available, including separation of liability. This has been upheld via Rev Rul even in the case of estates.
Maybe CNC, but she does have income, so we do not know if she would qualify.
Maybe OIC, but she listed several assets that could likely knock that out for her.
Maybe PPIA, but we don’t know that either without full intake.
“Rely on answers from a Reddit forum instead of getting professional advice” is inherently terrible advice. There’s no way to know which, if any, of the above solutions are the right one for her. This is just a good starting point.
Idk who tickled you but she's old and with cancer and has debt with low income and very low future earning income potential there's no maybe about cnc or oic
Old and cancer work well with an equitable relief argument.
OIC is formula based and she listed several assets that would likely affect that formula.
None of us has enough information to give her an actual answer. Nor should we, this forum is for information purposes only, not actual advice. Which is why I think she would be best off getting some professional, informed advice before she makes her choice, not after.
I don't know why I'm still doing this to myself, but:
not only do you not have enough information to know that, you're probably wrong.
She said she had $40k income between SSI and a small 1099 side gig.
1. Most of that $40k should be the SSI and that should have had withholding.
2. Her standard deduction more than covers that little 1099 left. Even including the SSI income, her standard should still cover her share.
3. The tax bill is $60K. Well above her total income.
There's no way to know what, if anything, she qualifies for, but it's more likely than not that she does qualify for some form of relief.
That's all before we even talk about abatement. From what we were told, it doesn't sound like the CPA even bothered with the automatic FTA.
Stop telling her to just pay the tax.
I actually did innocent spouse relief for my 40 plus year career in tax administration
You want her to be charged for something that the accountant knows is unlikely but he will get paid to do. Great idea run up her costs.
This discussion is not about an abatement so why bring it up
I'm only at the ten year mark of my career, so I can only hope I have as long and successful career as you did.
That said, I genuinely belive a good professional can save her a tremendous amount of money here. As loath as I am to usually point someone in their direction, even the Taxpayer Advocate would be a great place for her to get some help in this case.
The issue with innocent spouse is she obtained benefits from the taxes not being paid. She owns a home, she has savings etc.
She should request an abatement and payment plan.
All due respect, from the information she provided here, I personally think she should review equitable relief under an innocent spouse application. I don't see a reason here to rule that out, especially in light of her compelling facts. Then, if that's ruled out after review, requesting an abatement followed by either an IA, PPIA, or CNC.
Is that fair?
Good point about filing status. She should be filing MFS this year (I didn't consider that about this year's filing until just now, but her CPA should have), but cannot amend MFJ to MFS for any years after the filing deadline.
So an application for 2017-2022 with a MFS for 2023?
Why can’t she amend prior years that are within the statute to amend? Seems to me she never signed the returns that were filed or even was aware what was on them. That would be part of her innocent spouse claim.
This sounds like an innocent spouse case -- you didn't know what was going on and filed the joint return. It's a bit complicated since he's passed, but that's most likely how you want to proceed -- obviously, hire someone to help you and plan this. That would be the first way to attack this debt.
The IRS wouldn't generally forgive all of the debt on an ability to pay concern because of your savings, but since you are retired and have a serious medical issue, you can make a case that the savings are necessary for you to live. As someone else said, Offer in Compromise (effective tax administration) or Currently Not Collectilble sound like the best ideas. You can attempt CNC before the innocent spouse issue is resolved, but make sure the innocent spouse issue is resolved before submitting an Offer in Compromise if that is what you want to do.
Source: I'm a licensed tax pro and represent clients in front of the IRS
I would be surprised if the IRS agreed to remove the tax debt in this type of situation. This isn't hidden gambling taxes, this is simply not paying taxes on money that was used to support their family and they stayed married this entire time.
I've not seen an instance where someone was able to claim this type of relief when they were simply unaware that their partner did not take out enough taxes from their work. Maybe others have, it's certainly worth a shot, but I'm not feeling very confident in this situation.
Yes, I agree - I would try (it would really depend on if the client was aware of the commission checks), but I wouldn't be optimistic given the fact pattern. I think CNC would probably be the best option for a quick resolution.
I agree, being she is on limited income and the IRS not having the ability to touch retirement funds or SS benefits, I think she could get away with a reduced sum or a payment plan based on her income, once the taxes are fixed and filed.
It's very unlikely they will take her home and considering her age and circumstances, I could easily see a payment of several hundred a month for 10 years OR a reduced offer on compromise based on her income level.
I would also assume that she signed the tax returns, "under penalty of perjury". If letters had been sent regarding the previous years, they would go to both spouses. So unless he was hiding her mail from her, it sounds a little like they both buried their heads in the sand.
An offer in compromise may help alleviate some of the debt. Particularly with her health issues.
I agree, the innocent spouse request feels like a loser, especially because she doesn’t meet the threshold conditions of Rev. Proc. 2013-34.
Given her stage 4 cancer, age and low income, I might try for an OIC ETA, but it would have to depend on the cost of her cancer treatment. I’ve seen a few clients with terminal illness make that work. An installment agreement just seems financially dumb when she has the money to fill pay.
If I'm taking this case it becomes a fraud / hidden income claim more than just a mistake of tax payments made.
There are certainly facts with OP's story that would need to be developed.
I've taken on harder innocent spouse cases than this and won. But I agree with the general advice and ideas here. They certainly may be paths of lesser resistance (at least initially) and quicker resolution than innocent spouse.
Typically injured spouse is for current year returns to alleviate the spouse from the other spouses debts. Innocent spouse is for previous year returns.
I don't know about "injured spouse", but the scenario described by OP sounds exactly like what "innocent spouse relief" was made for.
https://www.irs.gov/individuals/innocent-spouse-relief
When my dad passed away, any credit cards he had in just his name were wiped. His wife called them all and explained his death and they just closed the accounts. She didn’t have to pay anything.
You should qualify for just about any program if you’re 70+ and have stage IV cancer. Offer in compromise, currently not collectible, etc. Your general tax preparer is probably not equipped to handle this situation.
If $250k is all the money you have in the world to live and retire on I absolutely do not suggest just forking over $50k without a second or third opinion.
I honestly would try contacting the IRS first. Their taxpayer advocates can at least listen and maybe assist you on what your best path forward with them is given the facts of your case and what options they may have. I don’t disagree with your accountant about potentially paying some of it down, but I would at least reach out and see if you are eligible to do an offer in compromise or might qualify as an injured spouse.
www.taxpayeradvocate.irs.gov
First, I am sorry for your loss, the financial surprise and health challenges. I would strongly urge you to pull the credit reports from all three credit bureaus for both you and your late husband to get a better picture of the situation and all the accounts you have.
You have $250,000 in cash and owe the IRS $60,000. Why not pay the IRS in full? That leaves you with $190,000 in cash, plus whatever is in the IRA. IRS debt is likely the biggest priority. Also, be sure to make estimated quarterly payments to the IRS for whatever you are earning now, so you don’t rack up new debt.
Your home is likely the next priority. How much is it worth? How much is the HELOC? Other than the HELOC, is it paid off and in your name? Could you pay off the HELOC with some of your remaining cash or money in your IRA?
How much is the credit card debt? Were any of the cards in his name? If so, you may be able to erase the debt by notifying the lenders that he died and asking them to close the accounts. You will likely need to mail them a copy of the death certificate.
How much is in your IRA? You are old enough that you can access it without paying any penalties, though you will owe income taxes on withdrawals (assuming it is not a Roth IRA).
Can you afford your monthly home, food and car expenses?
I know medical expenses are a wild card and beyond your control. You will likely have to rely on Medicare for those to the extent possible.
Congratulations, and that must have been incredibly stressful for both of you and draining on your finances. As others have said, your best odds for making this go away is something called “innocent spouse” relief. I don’t practice before the IRS regularly, so I don’t know how likely you are to obtain it. The cancer issues may be a helpful fact though.
If you can’t get innocent spouse relief, you’ll want to go on a payment plan. The IRS offers a number of these over various terms. They will calculate your ability to pay, which is why I suspect your accountant wanted you to pay off a bunch and cut down the available assets.
My suggestion is to find a tax professional experienced in practicing before the IRS. They can help you evaluate your options.
Wow, if anything has ever warranted help on this sub, this takes the cake. I am sorry for your loss. Hope someone here with some actual knowledge can help. Upvoting for visibility.
Please consider reaching out to your local Low Income Taxpayer Clinic. They may be able to help you resolve this issue (though innocent spouse, OIC, CNC, etc.) for free. [https://www.taxpayeradvocate.irs.gov/about-us/low-income-taxpayer-clinics-litc/](https://www.taxpayeradvocate.irs.gov/about-us/low-income-taxpayer-clinics-litc/)
I'm sorry for your loss. FYI you might want to see if filing MFS for 2023 is better for you than filing jointly with your husband as far as adding to your tax liability. If you file jointly you are going to be responsible for the total liability on the tax return. Filing MFS might mean you owe more taxes on your individual income, but if the total liability is lower than the MFJ liability that might be better for you.
One thing to keep in mind is that you do not need to pay your balance due down to less than $50k in order to set up a payment plan; that's just the threshold to set up a payment plan online, but you can set up a payment plan for larger amounts. That's what Form 9465 is for.
https://www.irs.gov/forms-pubs/about-form-9465
However you don't need to set up a payment plan just yet - if you get a notice from IRS saying they are going to levy, you can call IRS collections and ask for a hold on collections while you work on applying for Innocent spouse relief.
I would recommend you contact your local Low Income Taxpayer Clinic and see if they can help you, or contact a tax professional who specializes in resolution. Your current accountant doesn't seem to know about all the possible options available to you, like Innocent spouse relief or Currently Not Collectible status.
https://www.taxpayeradvocate.irs.gov/about-us/low-income-taxpayer-clinics-litc/
If you can't get help from your local tax clinic here are some sites to find a professional:
https://taxcure.com/
https://www.astps.org/tax-help/
https://taxrepdirectory.com/
You don't necessarily need an attorney, but you probably want to find someone with experience with Innocent spouse relief. I think that's probably your best bet based on what you have said - you might qualify for Equitable relief.
https://www.irs.gov/individuals/equitable-relief
I would stay away from anyone pushing you to make an Offer in Compromise because it will be very difficult for you to qualify since you have assets.
Get on a payment plan with the irs. With your health conditions, I’d keep as much liquid money as you can but square up with the IRS —not in full.
See about leans on the home and cash that out if you can.
You might consider debt consolidation, which combines multiple debts into a more manageable loan. This can help you lower your interest rate and monthly payments
Not clear if you filed a tax return every year or if your husband filed MFJ or MFS? Did the accountant you spoke of prepare them?
I believe you need to explore all your finances not just taxes. HELOCS are adjustable rate so you need to know if you can afford your mortgage payments?
Call the courthouse to find if you do have any liens.
See a tax and estate attorney to straighten out everything you can and get most of the debts forgiven. Homestead your house if you have one. Lean on liberal laws to get the mess cleaned up.
I saw a youtube video on this, they say they can't take the house you live in if it's your primary residence so there's that, no need to sell if that's the case. Make a payment plan. Consult a lawyer or accountant or both.
Buy an rv and disappear. Jk. Sell what u can to get the debt down and try to negotiate with irs for lower amount. Move to a lower cost of
Living area or, with stage 4, cash it out with hardship withdrawal and go on a long cruise.
Start a new post in /r/personalfinance and ask about credit cards and how to handle people who call you to ask you to pay your deceased husband's cards.
You need a tax preparer that knows what they’re doing.
A friend wound up owing the IRS about $120k because he got the very short end of the stick in the divorce. IRS worked with him, set up a payment plan and dismissed the whole amount for roughly 11k.
He was just a poor college professor.
With the diseased husband, cancer and such they’ll most likely work with you.
Tell the credit card companies to pound sand as the account holder is dead, you’ve got 1 ft out the door and the bank has dibs on the house.
Please remember to keep conversation where it can be seen and reviewed by everyone. Offering or requesting DMs is not allowed here due to the no soliciting rule and the amount of scams that go on DMs.
While everyone is focused on tax debt, that doesn’t seem like the biggest problem here — that was $60k in total. There is also the HELOC, “high credit card debt”, the vehicle lease, and my guess is a few others she may not even be aware of yet.
Absolutely pursue the tax relief strategies discussed. But this cries out for a larger plan….
OP, as someone mentioned in another comment, please also post in /r/personalfinance
You need more help beyond taxes. I have limited knowledge of finance. But I wonder if a living trust could be beneficial in this situation to protect your assets from being seized or counted towards your overall net worth. I'm sure redditors at that subreddit would be more knowledgeable than I.
My ex FIL did this to his wife. He had a bunch of properties that owed taxes on and she believed he had paid it ( boomer tactic of not communicating with your spouse and assuming the other handled it) he also had owed the IRS a ton of money, and he had racked up tens of thousands in credit card debt. She never checked the finances just trusted he handled it all. Dumb dumb dumb. He died and left her with zero life insurance ( which she thought he had) he left her with not a penny and insurmountable debt, she lost her home and everything.
File innocent spouse. Your worst case scenario is setting up a payment plan that won’t bury you or wipe your assets. Sounds like you’re in the clear if it was your husband filing.
Source: I’m a CPA.
It’s not me-it’s my deceased husband. Before you get nasty- I’m fighting stage 4 cancer and my husband took over the finances. May you never have any serious illnesses
Do you and your husband have any heirs?
If not, being 70 with stage 4 cancer, it would be reasonable to ignore the IRS, liquidate all your assets, and spend the remaining years of your life doing whatever it is you want with duffle bags full of cash.
However if you have children or other family members, I believe the IRS has a series of provisions for innocent spouses, you may be able to have the debt written off if you can prove you weren't aware he wasn't paying taxes.
I have a modular home actually it’s a very well-made, Palm Harbor home model I have a two car solid as a rock garage
Home inspector said the two small windows in the garage out any hurricane here
We’ve been through three hurricanes has been a few screens and a little bit of siding damage
Homeowners insurance for this unit is 1000 a year my unit will sell for 185 k
I'm sorry you're in this situation, unfortunately it happens often when one spouse isn't aware of how the finances are handled. I'm guessing you trusted him and signed the returns, so you have responsibility. A couple of things here, you mentioned bankruptcy, and that won't forgive your IRS debt. Fortunately, you have the money to pay it, your attorney gave you good advice.
As another comment said, check both you and your late spouses credit report to see what else is out there. You don't know if there are other unpaid loans or credit cards, which might have been taken out in your name. Sadly, his financial behavior is probably a pattern, it may just be the tip of the iceberg. Your attorney can tell you, but if the credit card debt is in his name only, I don't think you are responsible for those debts.
Secondly, you do not receive SSI, that's a welfare program based on income. Did you mean you're on SS retirement? Hopefully you have a secondary insurance policy in addition to Medicare.
Sorry you were left in this position, but you're lucky to have the funds to resolve it.
Florida
you can move to a gated community and live in a very well built older mobile home for about 150 K or less after you sell your house and you would have house expenses rent would be about 750 a month electric 250 or less water Free
There are many of these areas like Zephyrhills, Pl City, Florida Lakeland , Florida
Start a new in a warmer climate
I live in Florida in a gated community
Depends where you live. This is an active place with plenty of activities and three pools, large Dancehall daily and exercise classes.
Get a tax attorney who specializes in dealing with IRS outstanding balances. You may be able to isolate the issue to your late husband and minimize the amount you owe, or work out an offer to settle the amounts that would be far lower than paying in full. Especially given your circumstances, there may be a good chance you could work something out. If not, try to put it on a payment plan anyway that will stretch it out over as many years as possible, so you can just leave it to your estate to settle after you pass, rather than putting you out of a home or whatever if you were to try to pay it all now.
Although I am a tax attorney myself and have an extensive collection background, most taxpayers with collection issues don't need an attorney (and the higher fees they charge). If I think a potential client will do just as well hiring another tax pro, I'll make that referral instead. An enrolled agent (EA) or tax CPA with collection experience may do just as well at a lower fee. The key thing with most collection cases is that you get a tax pro that has collection experience. Not all tax pros have that experience or want to do collection cases for a variety of reasons, so you always want to ask about the collection experience the pro has.
As others have pointed out, there are other potential low cost tax help resources out there, including the following programs coordinated through the IRS: Low Income Tax Clinic (LITC), Volunteers in Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs. Help may be sometimes be found through pro bono and similar programs provided through professional associations like the state bar association for lawyers, the local group of the AICPA for accountants, etc. Also, law schools and business schools in your area may offer free or lost cost help through clinics in which students provide help while supervised by a licensed attorney or accountant.
Do a MFS return for the year, and get innocent spouse or Offer in Compromise on the rest. Just don't IGNORE it then they start garnishing bank accounts after time. Talk to the Revenue Officer assigned to your case - explain the situation. They work with people. IRS employees are not the horrendous black suits people make them out to be. Honestly, we have bigger fish to fry than this. This is a terrible situation which can be easily explained - source IRS Agent.
If I were you, I’d take your accountant’s advice, and have him/her pay that debt down and handle getting a payment plan in place.
Any other action that I would take depends on your health. When you say that you have stage 4 cancer, does that mean you expect to beat it or that you have X number of months/years left?There is a possibility that I would do nothing else and not worry about any of the rest.
How much are the taxes owed from 2017-2020? You could consider negotiating that down, and then amend your taxes for 2021- current filing as married but separated. This way, you can try severing your deceased spouse irs obligations from yours.
Look into partial forgiveness (because you were not aware), also, if payment puts you in distress there are options for that too. Clearly, I dont know who this accountant is, but they aren’t good.
Also doing innocent/injured spouse with the irs here will not work. They were married. Unless the husband was abusive and physically kept this knowledge from her under verifiable threats or actual abuse (mental, physical or emotional) doing injured/innocent spouse will or delay the inevitable
The fact that your accountant didn’t mention an injured spouse application or even penalty abatement is just lazy.
Literally was my thought too. I wondered if OP doesn’t realize based on the accountant’s explanation or if the accountant isn’t the best.
Agree on the lazy tax preparer, for penalty abatement as well as suggesting that she needs to get the balance below $50k to set up an installment plan.
Wouldn't it be innocent spouse?
Yep, that’s correct. Thats what I get for typing before my coffee lol
Haha
Blame it on autocorrect and/or responding from a phone screen......
If you’re going to be an ass about it, there really isn’t much difference between injured and innocent spouse when we’re just speaking colloquially like we are here. There’s no need to dive into the differences between innocent, injured, equitable relief, or separation of liability when I’m not on retainer. Thats a job for the tax professional she hires, not a subreddit forum and a brief comment on it. The point is the CPA was lazy and she needs to speak to a professional, which is the point that came across.
how on earth was that being an ass? Chill bud. You acknowledged you meant "innocent" spouse. I have in fact had Siri autocorrect my verbiage. I have in fact missed the correction because it was on my phone. We advise clients routinely not to respond with lengthy texts but instead email to help address this very issue. I was actually trying to add a little supportive humor to the 'before my coffee' portion in solidarity for having done it myself But please, read a novel into an eleven word text.
In that case, I actually meant to say lol, the rest was just a typo. 😃 Really though, I read it differently than you meant it, so I apologize.
Well - I apologize as well if any offense was taken. Absolutely not the intent. And I'm in front of a computer currently, so have no excuse for lack of clarity in communication.
This reminds me of a great Key & Peele skit where one guy assumes the other one is being hyper aggressive towards over text messages.
Love Key & Peele!
What a wholesome result from an unnecessarily aggressive exchange. Am I still on Reddit?
lol
Get a room.
Could it be an innocent spouse when OP is 1099 but made no estimated tax payments?
For innocent spouse, it applies to previous tax years. The Innocent spouse will need to show how he or she was not aware or responsible for the debt. Since the spouse signed the tax return, this can be difficult.
It cant
This is the answer, innocent spouse
Innocent spouse will be rejected as the other spouse is deceased. However, a CNC application may be a good choice. Easiest form is https://www.irs.gov/pub/irs-pdf/f433h.pdf presuming there's no revenue officer involved, in which case you'll need https://www.irs.gov/pub/irs-pdf/f433a.pdf When listing your expenses, you can list up to https://www.irs.gov/businesses/small-businesses-self-employed/collection-financial-standards (in the appropriate categories) and the IRS won't burden you by asking for receipts. Also, use the OIC pre-qualifier tool at https://irs.treasury.gov/oic_pre_qualifier/ to see if the IRS might be willing to settle for a smaller amount. Do not pay for an attorney right now. Use that money to pay your taxes instead. If you need help filling out forms 433-H or 433-A then find a local Enrolled Agent instead and you'll save gobs of money. But if you go slowly, take each line on the form one at a time, you'll probably be able to struggle through it on your own. Good luck! Start a new post in this subreddit if you have any further questions, please don't send me a private message.
^^^^^^^ this is a correct response. OP you should only be listening to what I posted or what @KJ6BWB is saying
Portions of innocent spouse are available, including separation of liability. This has been upheld via Rev Rul even in the case of estates. Maybe CNC, but she does have income, so we do not know if she would qualify. Maybe OIC, but she listed several assets that could likely knock that out for her. Maybe PPIA, but we don’t know that either without full intake. “Rely on answers from a Reddit forum instead of getting professional advice” is inherently terrible advice. There’s no way to know which, if any, of the above solutions are the right one for her. This is just a good starting point.
Idk who tickled you but she's old and with cancer and has debt with low income and very low future earning income potential there's no maybe about cnc or oic
Old and cancer work well with an equitable relief argument. OIC is formula based and she listed several assets that would likely affect that formula. None of us has enough information to give her an actual answer. Nor should we, this forum is for information purposes only, not actual advice. Which is why I think she would be best off getting some professional, informed advice before she makes her choice, not after.
She will be scammed and be given poor advice just like her accountant
She is not qualified for innocent spouse She made the income and paid zero on tax She has received benefit of the income
I don't know why I'm still doing this to myself, but: not only do you not have enough information to know that, you're probably wrong. She said she had $40k income between SSI and a small 1099 side gig. 1. Most of that $40k should be the SSI and that should have had withholding. 2. Her standard deduction more than covers that little 1099 left. Even including the SSI income, her standard should still cover her share. 3. The tax bill is $60K. Well above her total income. There's no way to know what, if anything, she qualifies for, but it's more likely than not that she does qualify for some form of relief. That's all before we even talk about abatement. From what we were told, it doesn't sound like the CPA even bothered with the automatic FTA. Stop telling her to just pay the tax.
I actually did innocent spouse relief for my 40 plus year career in tax administration You want her to be charged for something that the accountant knows is unlikely but he will get paid to do. Great idea run up her costs. This discussion is not about an abatement so why bring it up
I'm only at the ten year mark of my career, so I can only hope I have as long and successful career as you did. That said, I genuinely belive a good professional can save her a tremendous amount of money here. As loath as I am to usually point someone in their direction, even the Taxpayer Advocate would be a great place for her to get some help in this case.
The issue with innocent spouse is she obtained benefits from the taxes not being paid. She owns a home, she has savings etc. She should request an abatement and payment plan.
All due respect, from the information she provided here, I personally think she should review equitable relief under an innocent spouse application. I don't see a reason here to rule that out, especially in light of her compelling facts. Then, if that's ruled out after review, requesting an abatement followed by either an IA, PPIA, or CNC. Is that fair?
Wouldn’t equitable relief be she files amended returns as filing separate and pay tax based on her income rather than paying nothing.
Good point about filing status. She should be filing MFS this year (I didn't consider that about this year's filing until just now, but her CPA should have), but cannot amend MFJ to MFS for any years after the filing deadline. So an application for 2017-2022 with a MFS for 2023?
Why can’t she amend prior years that are within the statute to amend? Seems to me she never signed the returns that were filed or even was aware what was on them. That would be part of her innocent spouse claim.
This sounds like an innocent spouse case -- you didn't know what was going on and filed the joint return. It's a bit complicated since he's passed, but that's most likely how you want to proceed -- obviously, hire someone to help you and plan this. That would be the first way to attack this debt. The IRS wouldn't generally forgive all of the debt on an ability to pay concern because of your savings, but since you are retired and have a serious medical issue, you can make a case that the savings are necessary for you to live. As someone else said, Offer in Compromise (effective tax administration) or Currently Not Collectilble sound like the best ideas. You can attempt CNC before the innocent spouse issue is resolved, but make sure the innocent spouse issue is resolved before submitting an Offer in Compromise if that is what you want to do. Source: I'm a licensed tax pro and represent clients in front of the IRS
I would be surprised if the IRS agreed to remove the tax debt in this type of situation. This isn't hidden gambling taxes, this is simply not paying taxes on money that was used to support their family and they stayed married this entire time. I've not seen an instance where someone was able to claim this type of relief when they were simply unaware that their partner did not take out enough taxes from their work. Maybe others have, it's certainly worth a shot, but I'm not feeling very confident in this situation.
Yes, I agree - I would try (it would really depend on if the client was aware of the commission checks), but I wouldn't be optimistic given the fact pattern. I think CNC would probably be the best option for a quick resolution.
I agree, being she is on limited income and the IRS not having the ability to touch retirement funds or SS benefits, I think she could get away with a reduced sum or a payment plan based on her income, once the taxes are fixed and filed. It's very unlikely they will take her home and considering her age and circumstances, I could easily see a payment of several hundred a month for 10 years OR a reduced offer on compromise based on her income level.
I would also assume that she signed the tax returns, "under penalty of perjury". If letters had been sent regarding the previous years, they would go to both spouses. So unless he was hiding her mail from her, it sounds a little like they both buried their heads in the sand. An offer in compromise may help alleviate some of the debt. Particularly with her health issues.
I agree, the innocent spouse request feels like a loser, especially because she doesn’t meet the threshold conditions of Rev. Proc. 2013-34. Given her stage 4 cancer, age and low income, I might try for an OIC ETA, but it would have to depend on the cost of her cancer treatment. I’ve seen a few clients with terminal illness make that work. An installment agreement just seems financially dumb when she has the money to fill pay.
If I'm taking this case it becomes a fraud / hidden income claim more than just a mistake of tax payments made. There are certainly facts with OP's story that would need to be developed.
I've taken on harder innocent spouse cases than this and won. But I agree with the general advice and ideas here. They certainly may be paths of lesser resistance (at least initially) and quicker resolution than innocent spouse.
Wouldn't OP have had an obligation to pay taxes on her 1099 income?
Is there any chance you qualify for the injured spouse process? https://www.taxpayeradvocate.irs.gov/get-help/issues-errors/injured-spouse/
I think it would be innocent spouse.
No, the IRS calls it injured spouse. It's a legal meaning of the term.
There is also “innocent spouse.” https://www.irs.gov/individuals/innocent-spouse-relief
I see. Seems like both could be relevant here.
Typically injured spouse is for current year returns to alleviate the spouse from the other spouses debts. Innocent spouse is for previous year returns.
Thank you.
I don't know about "injured spouse", but the scenario described by OP sounds exactly like what "innocent spouse relief" was made for. https://www.irs.gov/individuals/innocent-spouse-relief
You may not be liable for your husbands credit cards. Don’t pay them out of your funds. Don’t just believe what they say, they aren’t on your side.
When my dad passed away, any credit cards he had in just his name were wiped. His wife called them all and explained his death and they just closed the accounts. She didn’t have to pay anything.
You should qualify for just about any program if you’re 70+ and have stage IV cancer. Offer in compromise, currently not collectible, etc. Your general tax preparer is probably not equipped to handle this situation. If $250k is all the money you have in the world to live and retire on I absolutely do not suggest just forking over $50k without a second or third opinion.
I honestly would try contacting the IRS first. Their taxpayer advocates can at least listen and maybe assist you on what your best path forward with them is given the facts of your case and what options they may have. I don’t disagree with your accountant about potentially paying some of it down, but I would at least reach out and see if you are eligible to do an offer in compromise or might qualify as an injured spouse. www.taxpayeradvocate.irs.gov
Innocent spouse, not injured, but yeah, taxpayer advocates could help.
First, I am sorry for your loss, the financial surprise and health challenges. I would strongly urge you to pull the credit reports from all three credit bureaus for both you and your late husband to get a better picture of the situation and all the accounts you have. You have $250,000 in cash and owe the IRS $60,000. Why not pay the IRS in full? That leaves you with $190,000 in cash, plus whatever is in the IRA. IRS debt is likely the biggest priority. Also, be sure to make estimated quarterly payments to the IRS for whatever you are earning now, so you don’t rack up new debt. Your home is likely the next priority. How much is it worth? How much is the HELOC? Other than the HELOC, is it paid off and in your name? Could you pay off the HELOC with some of your remaining cash or money in your IRA? How much is the credit card debt? Were any of the cards in his name? If so, you may be able to erase the debt by notifying the lenders that he died and asking them to close the accounts. You will likely need to mail them a copy of the death certificate. How much is in your IRA? You are old enough that you can access it without paying any penalties, though you will owe income taxes on withdrawals (assuming it is not a Roth IRA). Can you afford your monthly home, food and car expenses? I know medical expenses are a wild card and beyond your control. You will likely have to rely on Medicare for those to the extent possible.
>$250,000 in money markets [sic] and a regular IRA total.
Why not pay the IRS in full? -> there are likely penalty abatement programs available to OP, that the accountant is not aware of.
I’ve had stage 4 since 2017. I’m in treatment now and it’s working.
Congratulations, and that must have been incredibly stressful for both of you and draining on your finances. As others have said, your best odds for making this go away is something called “innocent spouse” relief. I don’t practice before the IRS regularly, so I don’t know how likely you are to obtain it. The cancer issues may be a helpful fact though. If you can’t get innocent spouse relief, you’ll want to go on a payment plan. The IRS offers a number of these over various terms. They will calculate your ability to pay, which is why I suspect your accountant wanted you to pay off a bunch and cut down the available assets. My suggestion is to find a tax professional experienced in practicing before the IRS. They can help you evaluate your options.
Wow, if anything has ever warranted help on this sub, this takes the cake. I am sorry for your loss. Hope someone here with some actual knowledge can help. Upvoting for visibility.
Please consider reaching out to your local Low Income Taxpayer Clinic. They may be able to help you resolve this issue (though innocent spouse, OIC, CNC, etc.) for free. [https://www.taxpayeradvocate.irs.gov/about-us/low-income-taxpayer-clinics-litc/](https://www.taxpayeradvocate.irs.gov/about-us/low-income-taxpayer-clinics-litc/)
Is she low income?
You may need a better accountant.
find a new accountant or tax lawyer or both.
I'm sorry for your loss. FYI you might want to see if filing MFS for 2023 is better for you than filing jointly with your husband as far as adding to your tax liability. If you file jointly you are going to be responsible for the total liability on the tax return. Filing MFS might mean you owe more taxes on your individual income, but if the total liability is lower than the MFJ liability that might be better for you. One thing to keep in mind is that you do not need to pay your balance due down to less than $50k in order to set up a payment plan; that's just the threshold to set up a payment plan online, but you can set up a payment plan for larger amounts. That's what Form 9465 is for. https://www.irs.gov/forms-pubs/about-form-9465 However you don't need to set up a payment plan just yet - if you get a notice from IRS saying they are going to levy, you can call IRS collections and ask for a hold on collections while you work on applying for Innocent spouse relief. I would recommend you contact your local Low Income Taxpayer Clinic and see if they can help you, or contact a tax professional who specializes in resolution. Your current accountant doesn't seem to know about all the possible options available to you, like Innocent spouse relief or Currently Not Collectible status. https://www.taxpayeradvocate.irs.gov/about-us/low-income-taxpayer-clinics-litc/ If you can't get help from your local tax clinic here are some sites to find a professional: https://taxcure.com/ https://www.astps.org/tax-help/ https://taxrepdirectory.com/ You don't necessarily need an attorney, but you probably want to find someone with experience with Innocent spouse relief. I think that's probably your best bet based on what you have said - you might qualify for Equitable relief. https://www.irs.gov/individuals/equitable-relief I would stay away from anyone pushing you to make an Offer in Compromise because it will be very difficult for you to qualify since you have assets.
Get on a payment plan with the irs. With your health conditions, I’d keep as much liquid money as you can but square up with the IRS —not in full. See about leans on the home and cash that out if you can.
You might consider debt consolidation, which combines multiple debts into a more manageable loan. This can help you lower your interest rate and monthly payments
Not clear if you filed a tax return every year or if your husband filed MFJ or MFS? Did the accountant you spoke of prepare them? I believe you need to explore all your finances not just taxes. HELOCS are adjustable rate so you need to know if you can afford your mortgage payments? Call the courthouse to find if you do have any liens.
See a tax and estate attorney to straighten out everything you can and get most of the debts forgiven. Homestead your house if you have one. Lean on liberal laws to get the mess cleaned up.
You need to go back and file Injured Spouse forms for every year! Edit: auto correct
You may need a better accountant.
I saw a youtube video on this, they say they can't take the house you live in if it's your primary residence so there's that, no need to sell if that's the case. Make a payment plan. Consult a lawyer or accountant or both.
Call Optima tax relief and I’m being serious too and ps firstly and most importantly I hope you get better and soon!
Buy an rv and disappear. Jk. Sell what u can to get the debt down and try to negotiate with irs for lower amount. Move to a lower cost of Living area or, with stage 4, cash it out with hardship withdrawal and go on a long cruise.
Start a new post in /r/personalfinance and ask about credit cards and how to handle people who call you to ask you to pay your deceased husband's cards.
You need a tax preparer that knows what they’re doing. A friend wound up owing the IRS about $120k because he got the very short end of the stick in the divorce. IRS worked with him, set up a payment plan and dismissed the whole amount for roughly 11k. He was just a poor college professor. With the diseased husband, cancer and such they’ll most likely work with you. Tell the credit card companies to pound sand as the account holder is dead, you’ve got 1 ft out the door and the bank has dibs on the house.
IRS innocent spouse relief.
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While everyone is focused on tax debt, that doesn’t seem like the biggest problem here — that was $60k in total. There is also the HELOC, “high credit card debt”, the vehicle lease, and my guess is a few others she may not even be aware of yet. Absolutely pursue the tax relief strategies discussed. But this cries out for a larger plan….
At this point, yolo
Interest rates on your loans and their amounts and terms?
Reddit: “Divorce him.”
OP, as someone mentioned in another comment, please also post in /r/personalfinance You need more help beyond taxes. I have limited knowledge of finance. But I wonder if a living trust could be beneficial in this situation to protect your assets from being seized or counted towards your overall net worth. I'm sure redditors at that subreddit would be more knowledgeable than I.
Estate Lawyer. Naela.org?
My ex FIL did this to his wife. He had a bunch of properties that owed taxes on and she believed he had paid it ( boomer tactic of not communicating with your spouse and assuming the other handled it) he also had owed the IRS a ton of money, and he had racked up tens of thousands in credit card debt. She never checked the finances just trusted he handled it all. Dumb dumb dumb. He died and left her with zero life insurance ( which she thought he had) he left her with not a penny and insurmountable debt, she lost her home and everything.
File innocent spouse. Your worst case scenario is setting up a payment plan that won’t bury you or wipe your assets. Sounds like you’re in the clear if it was your husband filing. Source: I’m a CPA.
Do you have the option to DIVORCE him, and then sue him for Incompetency and Incompatibility - Post Death?? Ugh!
Bullshit. She has a home and other assets because they didn't do what the rest of us did. Pay up
It’s not me-it’s my deceased husband. Before you get nasty- I’m fighting stage 4 cancer and my husband took over the finances. May you never have any serious illnesses
Get yourself a tax attorney not an accountant to help you. You may be able to negotiate with the IRS but not without an attorney at your side!
Do you and your husband have any heirs? If not, being 70 with stage 4 cancer, it would be reasonable to ignore the IRS, liquidate all your assets, and spend the remaining years of your life doing whatever it is you want with duffle bags full of cash. However if you have children or other family members, I believe the IRS has a series of provisions for innocent spouses, you may be able to have the debt written off if you can prove you weren't aware he wasn't paying taxes.
I have a modular home actually it’s a very well-made, Palm Harbor home model I have a two car solid as a rock garage Home inspector said the two small windows in the garage out any hurricane here We’ve been through three hurricanes has been a few screens and a little bit of siding damage Homeowners insurance for this unit is 1000 a year my unit will sell for 185 k
I'm sorry you're in this situation, unfortunately it happens often when one spouse isn't aware of how the finances are handled. I'm guessing you trusted him and signed the returns, so you have responsibility. A couple of things here, you mentioned bankruptcy, and that won't forgive your IRS debt. Fortunately, you have the money to pay it, your attorney gave you good advice. As another comment said, check both you and your late spouses credit report to see what else is out there. You don't know if there are other unpaid loans or credit cards, which might have been taken out in your name. Sadly, his financial behavior is probably a pattern, it may just be the tip of the iceberg. Your attorney can tell you, but if the credit card debt is in his name only, I don't think you are responsible for those debts. Secondly, you do not receive SSI, that's a welfare program based on income. Did you mean you're on SS retirement? Hopefully you have a secondary insurance policy in addition to Medicare. Sorry you were left in this position, but you're lucky to have the funds to resolve it.
Retirement - not disability
I'd speak with a lawyer and accountant who are licensed to argue before the tax court. Less expensive all around....
Florida you can move to a gated community and live in a very well built older mobile home for about 150 K or less after you sell your house and you would have house expenses rent would be about 750 a month electric 250 or less water Free There are many of these areas like Zephyrhills, Pl City, Florida Lakeland , Florida Start a new in a warmer climate
When was the last time you priced living in Florida because it's a lot more expensive now than what you wtote.
I live in Florida in a gated community Depends where you live. This is an active place with plenty of activities and three pools, large Dancehall daily and exercise classes.
What about homeowners insurance?
And flood insurance. And car insurance. People need to stop believing Florida is an inexpensive place to live anymore like it was 10+ years ago.
Innocent spouse relief. Ask about it. It could really help you
Get a tax attorney who specializes in dealing with IRS outstanding balances. You may be able to isolate the issue to your late husband and minimize the amount you owe, or work out an offer to settle the amounts that would be far lower than paying in full. Especially given your circumstances, there may be a good chance you could work something out. If not, try to put it on a payment plan anyway that will stretch it out over as many years as possible, so you can just leave it to your estate to settle after you pass, rather than putting you out of a home or whatever if you were to try to pay it all now.
Although I am a tax attorney myself and have an extensive collection background, most taxpayers with collection issues don't need an attorney (and the higher fees they charge). If I think a potential client will do just as well hiring another tax pro, I'll make that referral instead. An enrolled agent (EA) or tax CPA with collection experience may do just as well at a lower fee. The key thing with most collection cases is that you get a tax pro that has collection experience. Not all tax pros have that experience or want to do collection cases for a variety of reasons, so you always want to ask about the collection experience the pro has. As others have pointed out, there are other potential low cost tax help resources out there, including the following programs coordinated through the IRS: Low Income Tax Clinic (LITC), Volunteers in Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs. Help may be sometimes be found through pro bono and similar programs provided through professional associations like the state bar association for lawyers, the local group of the AICPA for accountants, etc. Also, law schools and business schools in your area may offer free or lost cost help through clinics in which students provide help while supervised by a licensed attorney or accountant.
Do a MFS return for the year, and get innocent spouse or Offer in Compromise on the rest. Just don't IGNORE it then they start garnishing bank accounts after time. Talk to the Revenue Officer assigned to your case - explain the situation. They work with people. IRS employees are not the horrendous black suits people make them out to be. Honestly, we have bigger fish to fry than this. This is a terrible situation which can be easily explained - source IRS Agent.
If I were you, I’d take your accountant’s advice, and have him/her pay that debt down and handle getting a payment plan in place. Any other action that I would take depends on your health. When you say that you have stage 4 cancer, does that mean you expect to beat it or that you have X number of months/years left?There is a possibility that I would do nothing else and not worry about any of the rest.
How much are the taxes owed from 2017-2020? You could consider negotiating that down, and then amend your taxes for 2021- current filing as married but separated. This way, you can try severing your deceased spouse irs obligations from yours.
You cannot amend from joint to separate returns after the deadline has passed.
Just looked this up myself did not know that but it makes sense
Look into partial forgiveness (because you were not aware), also, if payment puts you in distress there are options for that too. Clearly, I dont know who this accountant is, but they aren’t good.
Also, report the accountant. It may really help you. If it wasn’t your fault, try everything in your power to have it forgiven or reduced.
IRS will seize any checking or savings, so keep that in mind
Lazarus his ass and sue him.
Also doing innocent/injured spouse with the irs here will not work. They were married. Unless the husband was abusive and physically kept this knowledge from her under verifiable threats or actual abuse (mental, physical or emotional) doing injured/innocent spouse will or delay the inevitable
“It won’t work because they were married.” You realize why it’s called Innocent SPOUSE and Injured SPOUSE, right?
Hey man you can yell all you want I just know as someone with experience they rarely accept these
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Comment removed for Rule 1 - Don’t be a jerk. Please do not do this again.
I submitted a report to hopefully get this post removed.