Asking for Kind-of-ex-husband: how to deal with large federal tax debt?
May 21, 2014 8:52 PM Subscribe
I am writing this on behalf of my almost-ex-husband. He has owed between $80,000 and $100,000 to the IRS since 2003 and has done almost nothing about it. More details inside.
We separated at the very end of 2001, but have not gotten divorced yet because we were too lazy and poor to pay the fee ($215). In fact, I mailed in the divorce papers today.
In 2002, the year after we separated, ex worked as a contractor for part of the year on a 1099, and his taxes were not deducted from his paycheck. The following April he got a huge tax bill in the neighborhood of $45,000. He repeated this the following year. He wasn't able to pay any of it at the time. I believe he owes roughly $80,000 to $100,000 with fines and penalties. We are still legally married, and I was afraid I was legally liable for his tax debt. Since 2002 we have been filing our taxes as Married, Filing Separately.
Periodically the IRS would contact him demanding payment and threatening him with wage garnishment. I don't know how he convinced them to refrain from garnishing his wages, and I believe he has paid them only very tiny amounts over the years.
He always claimed he couldn't afford a lawyer, so never got help. About 5 years ago he contacted a lawyer he found online (!) for help. As far as I can tell, he worked with them for around a year, paid them a monthly retainer, but they never actually did anything. At my urging, he "fired" them.
Last year he contacted a local lawyer, referred by a friend. He met with the lawyer once or twice last year; He said the lawyer told him he could claim bankruptcy. Ex never followed up because he couldn't pay for more time.
Recently ex met with same lawyer again and arranged a barter: IT help in exchange for legal advice. Ex reported that lawyer said, because husband hasn't heard anything in many months from IRS, no bills or anything, that husband could just ignore the whole thing and hope the IRS has forgotten about him. When I said that didn't sound like a good idea (at BEST he'd have this hanging over his head like the sword of Damocles for the rest of his life!), husband said lawyer reiterated that husband could declare bankruptcy. There has been no follow-up.
Is this a legit option? Can ex file bankruptcy for an IRS debt? Ex works full-time as a contractor, so no job security. Bad credit, no credit cards, no property or assets, some personal debt, no savings or retirement funds. What are his options? I'm particularly concerned because A.) I don't want to be responsible or liable for his debt, and B.) I have been largely unemployed for a long time and am a full-time student and kids and I rely solely on the ex for my income. I am hoping to get a decent job when I graduate in December, but will still need child support from ex. He seems to be paralyzed about this issue and unwilling to do anything.
We separated at the very end of 2001, but have not gotten divorced yet because we were too lazy and poor to pay the fee ($215). In fact, I mailed in the divorce papers today.
In 2002, the year after we separated, ex worked as a contractor for part of the year on a 1099, and his taxes were not deducted from his paycheck. The following April he got a huge tax bill in the neighborhood of $45,000. He repeated this the following year. He wasn't able to pay any of it at the time. I believe he owes roughly $80,000 to $100,000 with fines and penalties. We are still legally married, and I was afraid I was legally liable for his tax debt. Since 2002 we have been filing our taxes as Married, Filing Separately.
Periodically the IRS would contact him demanding payment and threatening him with wage garnishment. I don't know how he convinced them to refrain from garnishing his wages, and I believe he has paid them only very tiny amounts over the years.
He always claimed he couldn't afford a lawyer, so never got help. About 5 years ago he contacted a lawyer he found online (!) for help. As far as I can tell, he worked with them for around a year, paid them a monthly retainer, but they never actually did anything. At my urging, he "fired" them.
Last year he contacted a local lawyer, referred by a friend. He met with the lawyer once or twice last year; He said the lawyer told him he could claim bankruptcy. Ex never followed up because he couldn't pay for more time.
Recently ex met with same lawyer again and arranged a barter: IT help in exchange for legal advice. Ex reported that lawyer said, because husband hasn't heard anything in many months from IRS, no bills or anything, that husband could just ignore the whole thing and hope the IRS has forgotten about him. When I said that didn't sound like a good idea (at BEST he'd have this hanging over his head like the sword of Damocles for the rest of his life!), husband said lawyer reiterated that husband could declare bankruptcy. There has been no follow-up.
Is this a legit option? Can ex file bankruptcy for an IRS debt? Ex works full-time as a contractor, so no job security. Bad credit, no credit cards, no property or assets, some personal debt, no savings or retirement funds. What are his options? I'm particularly concerned because A.) I don't want to be responsible or liable for his debt, and B.) I have been largely unemployed for a long time and am a full-time student and kids and I rely solely on the ex for my income. I am hoping to get a decent job when I graduate in December, but will still need child support from ex. He seems to be paralyzed about this issue and unwilling to do anything.
This is an about.com page about discharging taxes through bankruptcy; about.com is probably a medium-trust source or better, but risks having information go out of date. Take a look and see if he's in the ballpark for using bankruptcy in this fashion, and then confirm it with someone who's legit.
posted by Sunburnt at 9:08 PM on May 21, 2014
posted by Sunburnt at 9:08 PM on May 21, 2014
The IRS is not going to forget about you. I'm not sure about the specifics of IRS stuff and bankruptcy, but at the very least there's something called an offer in compromise. There are payment plans. Even if he doesn't qualify for discharge in bankruptcy, he'd qualify for something. He needs to save up some cash and actually pay a decent lawyer and keep paying them until the matter is resolved. But, to be honest, it sounds like whatever advice he's really been getting from attorneys in the past, it might boil down to an unwillingness to actually deal with having to deal with any temporary deprivation, either through payments or bankrtupcy, to make this go away. I'm not sure there's much you can do about that.
The nice thing about this story is that Married Filing Separately is the status that is usually recommended to spouses who have some reason to not want to share tax liability--like suspecting your spouse of tax evasion. For any return you filed separately, you aren't going to be liable for his taxes that year. So if this just started in 2002, and you've never filed jointly with him, this shouldn't be on you. Officially I'd say you should check with an attorney to be positive about that, but if there are any exceptions to this I haven't heard of them. It's even possible to get liability separated for joint filers sometimes, but it's not the default. This is one area where the IRS has been pretty good at not being evil.
posted by Sequence at 9:30 PM on May 21, 2014 [2 favorites]
The nice thing about this story is that Married Filing Separately is the status that is usually recommended to spouses who have some reason to not want to share tax liability--like suspecting your spouse of tax evasion. For any return you filed separately, you aren't going to be liable for his taxes that year. So if this just started in 2002, and you've never filed jointly with him, this shouldn't be on you. Officially I'd say you should check with an attorney to be positive about that, but if there are any exceptions to this I haven't heard of them. It's even possible to get liability separated for joint filers sometimes, but it's not the default. This is one area where the IRS has been pretty good at not being evil.
posted by Sequence at 9:30 PM on May 21, 2014 [2 favorites]
Did he ever actually file a return that year? If it was truly a contracting job, he would have offsetting expenses that could reasonably reduce the bill. There would still be interest and penalties but it may be much easier to handle with a payment plan. If he didn't file, he should still be able to file the return.
posted by icanbreathe at 10:51 PM on May 21, 2014
posted by icanbreathe at 10:51 PM on May 21, 2014
He doesn't need a lawyer, a tax person or CPA can help set something up. First is to file for the missing years, then he can set up a payment plan. The IRS can accommodate hardship issues to work out a reasonable recurring amount. However, since his debt is over $50k, he will have to fill out a form listing his assets and stuff.
The IRS is not going to forget about him and the IRS will file returns on his behalf and go after him based on those. I know from personal experience how much it sucks to wake up one day to find out that your bank account has been drained!
posted by rhizome at 1:40 AM on May 22, 2014
The IRS is not going to forget about him and the IRS will file returns on his behalf and go after him based on those. I know from personal experience how much it sucks to wake up one day to find out that your bank account has been drained!
posted by rhizome at 1:40 AM on May 22, 2014
I agree that you need to treat this like a You problem rather than a Him problem, see if you can find free or cheap legal advice if you can't afford to hire a lawyer (e.g. through a clinic), and consider the possibility that the information you're getting from him is not entirely complete or accurate.
posted by prefpara at 5:43 AM on May 22, 2014 [1 favorite]
posted by prefpara at 5:43 AM on May 22, 2014 [1 favorite]
There are bigger financial issues here. Your husband accumulated more tax debt in a year than I make a full time salaried job with a master's degree. (My field pays very low but still). I manage to have a car, savings (not much) and put money into retirement every month and pay taxes.
Something else is going on. Yes he's apparently willing to pay enough in child support to support you which means any money going to you can't go to the debt. You are a part of this. I'm not saying that you don't deserve money but the fact you can 100% live off of him in a separate living space says that that's a decent chunk of money. You and your kids deserve support.
The fact that measly amounts of money (250 for the divorce) can't be come up with says that the financial situation is dire or simply he doesn't want to. Seriously in a house of two with a income of 52000 I can find two hundred dollars for something that important. Depending on the day and my selfishness can find 200 for a hair cut and pedicure. It will hurt my budget but everything will get paid. I may may have to bring lunch to work instead of eating out.
Bankruptcy may be an option. I just don't buy that he can't pay anything. He also may have been working with lawyers on budgeting because it is really the first thing a lawyer is going to do with someone to figure out if there is any offers he can make to the IRS. Maybe there was and he refused. I don't know.
Get your own lawyer and figure out what your liable for. It depends on many factors. Hopefully how you have been filling for taxes will help.
The IRS will try and collect the debt eventually. There is no avoiding it forever.
posted by AlexiaSky at 6:38 AM on May 22, 2014 [3 favorites]
Something else is going on. Yes he's apparently willing to pay enough in child support to support you which means any money going to you can't go to the debt. You are a part of this. I'm not saying that you don't deserve money but the fact you can 100% live off of him in a separate living space says that that's a decent chunk of money. You and your kids deserve support.
The fact that measly amounts of money (250 for the divorce) can't be come up with says that the financial situation is dire or simply he doesn't want to. Seriously in a house of two with a income of 52000 I can find two hundred dollars for something that important. Depending on the day and my selfishness can find 200 for a hair cut and pedicure. It will hurt my budget but everything will get paid. I may may have to bring lunch to work instead of eating out.
Bankruptcy may be an option. I just don't buy that he can't pay anything. He also may have been working with lawyers on budgeting because it is really the first thing a lawyer is going to do with someone to figure out if there is any offers he can make to the IRS. Maybe there was and he refused. I don't know.
Get your own lawyer and figure out what your liable for. It depends on many factors. Hopefully how you have been filling for taxes will help.
The IRS will try and collect the debt eventually. There is no avoiding it forever.
posted by AlexiaSky at 6:38 AM on May 22, 2014 [3 favorites]
A lawyer is absolutely useless in this situation, unless something crazy happens. (He is arrested, etc.)
If he owes that much money, he will be assigned a dedicated IRS person from the High Rollers department. (It has a real name; I forget.)
The IRS is forbidden from hardship collection. They will calculate how much he can pay and when, based on how much income and things he has.
BUT they are not forbidden to pursue legal remedies if he is not in contact with them. He absolutely needs to be in contact with them. They want to hear from him. They are not even mean, in general! But. It will be arduous and annoying. He will need to refile tax years he did not file. It will go on for a while.
There are some other things to know here, but they come later. (Offer in compromise, bankruptcy, etc.)
But meanwhile as for YOU... you need to finalize your divorce. Incredibly quickly. Now.
posted by RJ Reynolds at 6:43 AM on May 22, 2014 [1 favorite]
If he owes that much money, he will be assigned a dedicated IRS person from the High Rollers department. (It has a real name; I forget.)
The IRS is forbidden from hardship collection. They will calculate how much he can pay and when, based on how much income and things he has.
BUT they are not forbidden to pursue legal remedies if he is not in contact with them. He absolutely needs to be in contact with them. They want to hear from him. They are not even mean, in general! But. It will be arduous and annoying. He will need to refile tax years he did not file. It will go on for a while.
There are some other things to know here, but they come later. (Offer in compromise, bankruptcy, etc.)
But meanwhile as for YOU... you need to finalize your divorce. Incredibly quickly. Now.
posted by RJ Reynolds at 6:43 AM on May 22, 2014 [1 favorite]
There are several nonprofit law firms in my area that assist with bankruptcy and with this type of issue - some provide representation, some offer advice only. If you ask a mod to post your location, perhaps someone will be able to suggest a low-cost option local to you. If you / your husband happen to be in LA, memail me and I can give you a list of places to check out.
posted by insectosaurus at 6:49 AM on May 22, 2014
posted by insectosaurus at 6:49 AM on May 22, 2014
What you need is a CPA to clean up your taxes and liability. This is a situation where you need to take care of you. Ex is on his own. BTW, you said he has $45K in unpaid taxes in 2002 and another $45,000 for 2003. He owes penalties and more than a decade of interest on a $90K debt. He owes far more than $100K.
I'm sorry because I know you're cash tapped and another expensive professional is hardship. This isn't the time to be poor and lazy. This is the time to get off your duff and find help. Look around for local tax aid organizations, call the local CPA organization and see if there is anyone who will help you pro bono. If you have a moderator add your location people may be able to give suggestions for resources in your area.
You are responsible for yourself and your kids. Your spouse is unable/unwilling to resolve this issue. Cut your losses and leave your ex to his own devices. Find a tax person who can help you so this isn't hanging over your head forever. You need to get this resolved so that bankruptcy isn't the only option for YOU.
posted by 26.2 at 10:19 AM on May 22, 2014 [1 favorite]
I'm sorry because I know you're cash tapped and another expensive professional is hardship. This isn't the time to be poor and lazy. This is the time to get off your duff and find help. Look around for local tax aid organizations, call the local CPA organization and see if there is anyone who will help you pro bono. If you have a moderator add your location people may be able to give suggestions for resources in your area.
You are responsible for yourself and your kids. Your spouse is unable/unwilling to resolve this issue. Cut your losses and leave your ex to his own devices. Find a tax person who can help you so this isn't hanging over your head forever. You need to get this resolved so that bankruptcy isn't the only option for YOU.
posted by 26.2 at 10:19 AM on May 22, 2014 [1 favorite]
For you, just get a short consultation with a lawyer to confirm that your filing separately status has protected you from liability.
Ignore him. Everything about the numbers is off here. 45 k in taxes in one year, Can't afford $215, but fully supports you and your kids? Is it possibly he's lying to you about his financial situation so you don't go for alimony or child support or something? In any case your numbers as presented are fishy.
posted by WeekendJen at 11:14 AM on May 22, 2014 [1 favorite]
Ignore him. Everything about the numbers is off here. 45 k in taxes in one year, Can't afford $215, but fully supports you and your kids? Is it possibly he's lying to you about his financial situation so you don't go for alimony or child support or something? In any case your numbers as presented are fishy.
posted by WeekendJen at 11:14 AM on May 22, 2014 [1 favorite]
Ditto young rope-rider's comments.
Yes, bankruptcy can discharge a tax debt assuming he actually filed...and I bet he did not and if he did he probably lied about his income.
Ask to be declared an "innocent spouse" if they send you that original letter because they have to notice you before they try to garnish. It is likely that will happen.
Good luck.
posted by OhSusannah at 6:25 PM on May 22, 2014
Yes, bankruptcy can discharge a tax debt assuming he actually filed...and I bet he did not and if he did he probably lied about his income.
Ask to be declared an "innocent spouse" if they send you that original letter because they have to notice you before they try to garnish. It is likely that will happen.
Good luck.
posted by OhSusannah at 6:25 PM on May 22, 2014
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