Tax Q: Gettin' divorced, can't claim deductions.
March 28, 2013 12:16 PM Subscribe
Here's the rub: In February on 2012, I decided to end my marriage. Because I was dead broke, we simply moved apart, split the bank account in two and went our separate ways with the understanding that we'd make a move to formally divorce in the next year. We did not get a legal separation. That divorce is now pending. My soon-to-be-ex-wife filed her taxes 'Married, Filing Separately'. This causing me all kind of tax havoc, including a bill I have no way of paying. More inside...
2012 was a big year. I made $6412, 1099 style. I became a graduate student. I spent $30k of Uncle Sam's money on tuition.
All told, I owe the government $789. I do not have $789. I have $79. But between the cost of getting divorced and tuition, I figured I'd have some nice deductions on my taxes. Instead, because I have to file 'Married, filing separately', I can't claim any of those educational deductions and the guy who make $6412 bucks last year and has no income is stuck with a $789 tax bill.
Is there any way around this? Tips or tricks from tax gurus? Or am I just stuck in a trap of my own making?
2012 was a big year. I made $6412, 1099 style. I became a graduate student. I spent $30k of Uncle Sam's money on tuition.
All told, I owe the government $789. I do not have $789. I have $79. But between the cost of getting divorced and tuition, I figured I'd have some nice deductions on my taxes. Instead, because I have to file 'Married, filing separately', I can't claim any of those educational deductions and the guy who make $6412 bucks last year and has no income is stuck with a $789 tax bill.
Is there any way around this? Tips or tricks from tax gurus? Or am I just stuck in a trap of my own making?
I'm not a tax expert, but if the divorce is still pending then you actually are married, filing separately. It may cost more but on the plus side you aren't committing tax fraud.
posted by ook at 12:22 PM on March 28, 2013 [14 favorites]
posted by ook at 12:22 PM on March 28, 2013 [14 favorites]
IRS takes credit cards.
posted by MrMoonPie at 12:24 PM on March 28, 2013 [1 favorite]
posted by MrMoonPie at 12:24 PM on March 28, 2013 [1 favorite]
Ugh, sorry, this is just how it has to be. If you had worked things out with her beforehand, you all could have filed jointly (you are still married after all), but since she's already filed you're hosed.
Payment plans, my friend.
posted by like_a_friend at 12:25 PM on March 28, 2013
Payment plans, my friend.
posted by like_a_friend at 12:25 PM on March 28, 2013
Yes to a payment plan - and please, contact them and set it up, and do not wait for them to contact you. I've heard they are much nicer about it if you handle it before the lien on your paycheck phase.
posted by needlegrrl at 12:25 PM on March 28, 2013 [1 favorite]
posted by needlegrrl at 12:25 PM on March 28, 2013 [1 favorite]
The IRS are super duper nice (I am not joking - best customer service experiences I've ever had, they must be actual saints) and the payment plan is very nearly effortless.
You could also ask a tax professional, and it may be worth it for you both to file amendments if your wife is open to it. Doing those things will cost money, though. Without a legal separation, you can freely file either 'married' option (and you don't have to be separated to file MFS either, it's just a choice married people get). But if you think that's not going to happen, call the nice folks at the help line.
You may be able to settle to have her pay it off in the divorce.
posted by Lyn Never at 12:39 PM on March 28, 2013 [4 favorites]
You could also ask a tax professional, and it may be worth it for you both to file amendments if your wife is open to it. Doing those things will cost money, though. Without a legal separation, you can freely file either 'married' option (and you don't have to be separated to file MFS either, it's just a choice married people get). But if you think that's not going to happen, call the nice folks at the help line.
You may be able to settle to have her pay it off in the divorce.
posted by Lyn Never at 12:39 PM on March 28, 2013 [4 favorites]
We took four years to pay off a much, much larger tax bill that came up because we had 1 year with loads of income (and incorrect withholding) followed by unemployment all around (thx tech bubble!). Payment plan. You could also talk to an accountant and see if they have any special thoughts on this. Though they are likely pretty busy right now.
posted by amanda at 12:40 PM on March 28, 2013
posted by amanda at 12:40 PM on March 28, 2013
If you only made $6,412, how do you owe any taxes?
posted by chickenmagazine at 12:49 PM on March 28, 2013 [3 favorites]
posted by chickenmagazine at 12:49 PM on March 28, 2013 [3 favorites]
If you only made $6,412, how do you owe any taxes?
I'm also confused about this. Your standard deduction by itself is $5,950.
posted by small_ruminant at 12:55 PM on March 28, 2013 [1 favorite]
I'm also confused about this. Your standard deduction by itself is $5,950.
posted by small_ruminant at 12:55 PM on March 28, 2013 [1 favorite]
If you only made $6,412, how do you owe any taxes?
I'm also confused about this. Your standard deduction by itself is $5,950.
Yeah... I mean, even if you're Married Filing Separately you get the Standard Deduction and a $3800 exemption assuming no one is claiming you as a dependent, so that's at least $9750 right there. (remember that you can contact the mods about posting a followup here if you want)
posted by The Michael The at 12:57 PM on March 28, 2013 [1 favorite]
I'm also confused about this. Your standard deduction by itself is $5,950.
Yeah... I mean, even if you're Married Filing Separately you get the Standard Deduction and a $3800 exemption assuming no one is claiming you as a dependent, so that's at least $9750 right there. (remember that you can contact the mods about posting a followup here if you want)
posted by The Michael The at 12:57 PM on March 28, 2013 [1 favorite]
Go to a free tax site and get them to do your taxes for you. If you're in California, here's a place to start.
posted by small_ruminant at 12:57 PM on March 28, 2013
posted by small_ruminant at 12:57 PM on March 28, 2013
And once you're divorced and can file Single, you might even qualify for a credit (like the Earned Income Credit.) You'd qualify now, probably, except for the Married Filing Separately prohibition on it.
posted by small_ruminant at 12:59 PM on March 28, 2013
posted by small_ruminant at 12:59 PM on March 28, 2013
Another option. If you are friendly enough with your ex - explain the situation to her and see if she would be willing to file an amendment and then you guys file together as married. Who knows, she may even come out better that way herself!
posted by ZabeLeeZoo at 1:01 PM on March 28, 2013 [2 favorites]
posted by ZabeLeeZoo at 1:01 PM on March 28, 2013 [2 favorites]
If the OP really only made $6412 he might come out worse, especially if his wife made bank.
posted by small_ruminant at 1:02 PM on March 28, 2013
posted by small_ruminant at 1:02 PM on March 28, 2013
If you're Married Filing Separately you have to both choose the same kind of deduction, either standard or itemized. If his ex chose itemized and filed first, he has no choice but to do the same.
posted by bink at 1:22 PM on March 28, 2013
posted by bink at 1:22 PM on March 28, 2013
1) Yes, you shouldn't owe anything if the $6,412 is your only income.
2) If there's more to the story and you do owe, ZabeLeeZoo is right: If you are friendly with your ex, you could file an amended (joint) return. Especially given your educational expenses, the two of you combined will almost certainly come out better, so you could split the proceeds. In fact, even if you actually owe zero filing a MFS return, the two of you would still almost certainly be better off filing jointly, so you could still file a joint return and split the proceeds - again, if you're willing to deal with each other
As noted here, one reason to file separately is when "Spouses are separated, but not yet divorced, and they wish to keep their finances as separate as possible." So, for example, if your ex is worried that you will request alimony or other financial support in the divorce, she may wish to pay the extra taxes to avoid sharing financial information with you.
posted by Mr.Know-it-some at 1:23 PM on March 28, 2013
2) If there's more to the story and you do owe, ZabeLeeZoo is right: If you are friendly with your ex, you could file an amended (joint) return. Especially given your educational expenses, the two of you combined will almost certainly come out better, so you could split the proceeds. In fact, even if you actually owe zero filing a MFS return, the two of you would still almost certainly be better off filing jointly, so you could still file a joint return and split the proceeds - again, if you're willing to deal with each other
As noted here, one reason to file separately is when "Spouses are separated, but not yet divorced, and they wish to keep their finances as separate as possible." So, for example, if your ex is worried that you will request alimony or other financial support in the divorce, she may wish to pay the extra taxes to avoid sharing financial information with you.
posted by Mr.Know-it-some at 1:23 PM on March 28, 2013
Wouldn't he get the eitc making that little? I don't understand how he can owe money. Unpaid payroll taxes, maybe?
posted by empath at 1:31 PM on March 28, 2013
posted by empath at 1:31 PM on March 28, 2013
Nthing to first, don't panic!
Then get your taxes done by a professional (even HR Block).
There are probably options you don't know about.
If it turns out you owe the IRS, write them. They are unbelievably nice and helpful. This past year, I got a letter that because of how my ex had filed, I now owed the IRS over 6k. So I wrote them a long, sad letter and filed an Offer to Compromise.
A few weeks later, they called me and went through a lot of my return and it turned out the IRS owed me $400.
Don't panic. They'll help you. And you have to sort out the filing and deductions with your wife for tax purposes soon.
posted by kinetic at 1:31 PM on March 28, 2013
Then get your taxes done by a professional (even HR Block).
There are probably options you don't know about.
If it turns out you owe the IRS, write them. They are unbelievably nice and helpful. This past year, I got a letter that because of how my ex had filed, I now owed the IRS over 6k. So I wrote them a long, sad letter and filed an Offer to Compromise.
A few weeks later, they called me and went through a lot of my return and it turned out the IRS owed me $400.
Don't panic. They'll help you. And you have to sort out the filing and deductions with your wife for tax purposes soon.
posted by kinetic at 1:31 PM on March 28, 2013
Wouldn't he get the eitc making that little? You're not allowed with Married filing separately.
posted by small_ruminant at 1:33 PM on March 28, 2013
posted by small_ruminant at 1:33 PM on March 28, 2013
If your ex didn't itemize, you shouldn't owe anything. If your ex did itemize and took deductions that you paid for, talk to your divorce attorney.
posted by cnc at 2:12 PM on March 28, 2013
posted by cnc at 2:12 PM on March 28, 2013
I disagree that you wouldn't have owed anything if your wife didn't itemize. You're forgetting the SE tax.
You had $6412 in self employment income (that's what happens when you get paid via a 1099 misc). Following the instructions on schedule se ez I get a total SE tax owed of $787. Essentially everything you owe is from the self employment tax. As far as I know, all the deductions in the world won't make that go away, they just reduce the amount that you pay the regular income tax on (which is already essentially zero in your case).
The only way you might have been able to avoid that would have been through a refundable credit that could then apply to what you owe for the SE tax, so maybe the eitc could have helped you, but filing jointly it's not even clear you would have been eligible for that anyway.
I guess if your wife overpaid her taxes, that would have credited towards your bill with a joint filing, making the amount owed to the IRS less or nil, but that's your wife's money, so there would still be a debt, no?
A payment plan seems like a good option.
posted by NormieP at 2:28 PM on March 28, 2013 [9 favorites]
You had $6412 in self employment income (that's what happens when you get paid via a 1099 misc). Following the instructions on schedule se ez I get a total SE tax owed of $787. Essentially everything you owe is from the self employment tax. As far as I know, all the deductions in the world won't make that go away, they just reduce the amount that you pay the regular income tax on (which is already essentially zero in your case).
The only way you might have been able to avoid that would have been through a refundable credit that could then apply to what you owe for the SE tax, so maybe the eitc could have helped you, but filing jointly it's not even clear you would have been eligible for that anyway.
I guess if your wife overpaid her taxes, that would have credited towards your bill with a joint filing, making the amount owed to the IRS less or nil, but that's your wife's money, so there would still be a debt, no?
A payment plan seems like a good option.
posted by NormieP at 2:28 PM on March 28, 2013 [9 favorites]
Ahhh, thanks for that pointer, NormieP. OP, ignore my post above.
posted by The Michael The at 2:32 PM on March 28, 2013
posted by The Michael The at 2:32 PM on March 28, 2013
Yup, I forgot about the self-employment tax :(
posted by small_ruminant at 3:17 PM on March 28, 2013
posted by small_ruminant at 3:17 PM on March 28, 2013
Check if your university has a tax liason for grad students. The whole education deduction and fellowship mess is hard enough to figure out, and they may be able to help you determine if you should really be paying that SE tax on the 1099. It may depend on where that money came from.
posted by slow graffiti at 4:15 PM on March 28, 2013 [1 favorite]
posted by slow graffiti at 4:15 PM on March 28, 2013 [1 favorite]
If you only made $6,412, how do you owe any taxes?
FICA taxes most likely. For people who were paid as independent contractors (1099), you have to make your own self-employment tax payments to take the place of standard payroll taxes, even if you don't have any actual income tax liability. This is why you should make self-employment payments to the IRS as you are paid so it's not a lump sum when you file. (I've made this mistake myself.) I think if you make more than a certain amount of income via 1099 there is also an additional penalty if you didn't make payments throughout the year.
posted by stopgap at 5:17 PM on March 28, 2013
FICA taxes most likely. For people who were paid as independent contractors (1099), you have to make your own self-employment tax payments to take the place of standard payroll taxes, even if you don't have any actual income tax liability. This is why you should make self-employment payments to the IRS as you are paid so it's not a lump sum when you file. (I've made this mistake myself.) I think if you make more than a certain amount of income via 1099 there is also an additional penalty if you didn't make payments throughout the year.
posted by stopgap at 5:17 PM on March 28, 2013
And when stopgap says "standard payroll taxes," read that to mean:
social security tax
Medicare tax
state or local unemployment tax - in some locations
posted by yclipse at 6:07 PM on March 28, 2013
social security tax
Medicare tax
state or local unemployment tax - in some locations
posted by yclipse at 6:07 PM on March 28, 2013
If you're filing 1099 and the money matters, you absolutely need to have a professional or someone otherwise qualified look at it. There are so many things you can overlook or misunderstand that it's not worth the risk that you got it right, regardless of whether or not you break even or owe.
posted by feloniousmonk at 7:19 PM on March 28, 2013
posted by feloniousmonk at 7:19 PM on March 28, 2013
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