by admin | Mar 28, 2012 | Back Taxes, Income Tax Preparation, IRS Tax Problem, Representation, Tax Help
This comes as a great surprise to many expecting their IRS tax refund. The IRS sends a notice telling you they have used their right to offset to pay old debts such as State Tax Debts, Child Support or even Student loans.
If this happens to you I would suggest calling us at Fresh Start Tax, 1-866-700-1040 to permanently resolve your IRS tax matter and get tax relief.
Most taxpayers in this situation may qualify for an offer in compromise or a tax debt settlement. By calling our office we can find out if you qualify.
Here are the rules and regs regarding tax refunds that may be applied to offset certain debts
The Department of Treasury’s Financial Management Service, which issues IRS tax refunds, can use part or all of your federal tax refund to satisfy certain unpaid debts.
Facts you what to know about tax refund offsets:
1. If you owe federal or state income taxes, your refund will be offset to pay those taxes first. If you had other debt such as child support or student loan debt that was submitted for offset, FMS will apply as much of your refund as is needed to pay off the debt and then issue any remaining refund to you if a tax refund is applicable.
2. You will receive a notice from the IRS if an offset occur. The offset will occur each and every year to the problem is resolved.
The tax notice will include the original refund amount, your offset amount, the agency receiving the payment and its contact information. If the information about the exist debt is incorrect, we suggest you contact them directly to resolve the problem.
3. If you believe you do not owe the debt or you are disputing the amount taken from your refund, you should contact the agency shown on the notice, not the IRS.
4. If you filed a joint return and you are not responsible for the debt, but you are entitled to a portion of the refund, you may request your portion of the refund by filing IRS Form 8379, Injured Spouse Allocation.
You should attach IRS tax form 8379 to your original Form 1040, Form 1040A, or Form 1040EZ or file it by itself after you are notified of an offset. Form 8379 can be downloaded from the IRS website at www.irs.gov.
5. You can file Form 8379 electronically. If you file a paper tax return you can include Form 8379 with your return, write “INJURED SPOUSE” at the top left of the Form 1040, 1040A or 1040EZ. IRS will process your allocation request before an offset occurs.
6. If you are filing Form 8379 by itself, it must show both spouses’ Social Security numbers in the same order as they appeared on your income tax return. You, the “injured” spouse, must sign the form.
You should not attach the previously filed Form 1040 to the Form 8379.
Send the Form 8379 to the IRS Service Center where you filed your original return only so the documentation may be matched.
7. The IRS will compute the injured spouse’s share of the joint return. Contact the IRS only if your original refund amount shown on the FMS offset notice differs from the refund amount shown on your tax return.
8. Follow the instructions on Form 8379 carefully and be sure to attach the required forms to avoid delays.
If you are looking for quality tax relief from a professional tax firm, call Fresh Start Tax LLC today.
by steve | Oct 21, 2010 | IRS Tax Advice
After working for IRS for 10 years and being in private practice for 28 years, our firm has seen our share of innocent and injured spouse cases.
We have successful defended hundreds of cases involving both innocent and injured spouses. We have on staff a former IRS Agent who was an audit manager and one of the countries true specialists in this area.
If you need immediate relief call us today.
Facts About Innocent, Injured Spouse
Injured spouse status and innocent spouse status are frequently confused with each other.
Innocent spouse status relieves a spouse of the responsibility for paying taxes that may then be collected from the other spouse. Most innocent spouse claims are filed after the tax return has been filed.
Injured spouse status involves obtaining a refund of a spouse’s interest in an overpayment that has been offset under I.R.C. § 6402.Most injure spouse returns get filed with a current tax return.
How Offset Issues Arise. When spouses file joint income tax returns, each spouse has a separate interest in the jointly reported income and in any overpayment.
If both spouses are liable for a debt described in section 6402, the entire overpayment may be offset. Offset issues arise where spouses file joint returns and only one spouse owes a section 6402 debt.
In this circumstance, an allocation must be made to determine the liable spouse’s interest in the overpayment, the amount that can be offset for the liable spouse’s debt, and the amount to be refunded to the non-liable spouse. Rev. Rul. 80-7, 1980-1 C.B. 296, amplified by Rev. Rul. 87-52, 1987-1 C.B. 347. Due to different property rights in income tax and withholding and other credits, there is a difference in the allocation process for community property states as opposed to the other states.
Injured Spouse Claims. If spouses file a joint income tax return and an obligation described in section 6402 is owed by one of the spouses, the Service will generally offset the entire overpayment. See Rev. Rul. 84-171, 1984-2 C.B. 310.
If the spouse who does not owe the obligation (referred to as the “injured spouse”) files a claim for his or her share of the overpayment (referred to as an “injured spouse claim”), the Service is required to refund his or her share of the overpayment. IRM 25.15.1.2.5; 31 C.F.R. §§ 285.2(f) and (g).
An injured spouse obtains his or her portion of the overpayment by filing a Form 8379. IRM 25.15.1.2.5.
An injured spouse claim can also be filed with an original return. As will be discussed below, in some circumstances the Service may have a common law right under state law to offset all or part of the injured spouse’s community property share of the overpayment.
by steve | Oct 15, 2010 | IRS Tax Advice
With so many cases of divorce and separation thousands of innocent and injured spouse claims are being filed every year. The law now expands the relief for the innocent or injured spouse. Should you need immediate tax relief, call Fresh Start Tax today. 1-866-700-1040
Many married taxpayers choose to file a joint tax return because of certain benefits this filing status allows. Both taxpayers are jointly and severally liable for the tax and any additions to tax, interest, or penalties that arise as a result of the joint return even if they later divorce. Joint and several liability means that each taxpayer is legally responsible for the entire liability. Thus, both spouses are generally held responsible for all the tax due even if one spouse earned all the income or claimed improper deductions or credits. This is true even if a divorce decree states that a former spouse will be responsible for any amounts due on previously filed joint returns. In some cases, however, a spouse can get relief from joint and several liability.
There are three types of relief from joint and several liability for spouses who filed joint returns:
1. Innocent Spouse Relief provides you relief from additional tax you owe if your spouse or former spouse failed to report income, reported income improperly or claimed improper deductions or credits.
2. Separation of Liability Relief provides for the allocation of additional tax owed between you and your spouse or former spouse because an item was not reported properly on a joint return. The tax allocated to you is the amount for which you are responsible.
3. Equitable Relief may apply when you do not qualify for innocent spouse relief or separation of liability relief for something not reported properly on a joint return. You may also qualify for equitable relief if the correct amount of tax was reported on your joint return but the tax remains unpaid.
Very Important Note: You must request relief no later than 2 years after the date the IRS first attempted to collect the tax from you, regardless of the type of relief you are seeking. Not all IRS attempts to collect the tax from you will trigger the two year period for filing a request for relief.
Collection activities that may start the two year period are:
(1) The IRS issues a section 6330 notice to you. A section 6330 notice is a notice that tells you that the IRS intends to levy and that you have a right to a collection due process hearing;
(2) The IRS applies your income tax refund against an amount you owed on a joint return for another year for which you seek relief and the IRS informed you about your right to file a Form 8857;
(3) The filing of a suit by the United States against you for the collection of the joint tax liability;
(4) The filing of a claim by the IRS in a court proceeding in which you were a party or the filing of a claim that involves your property.
You must meet all of the following conditions to qualify for “innocent spouse relief”:
1. You filed a joint return, which has an understatement of tax, directly related to your spouse’s erroneous items. Any income omitted from the joint return is an erroneous item. Deductions, credits, and property bases are erroneous items if they are incorrectly reported on the joint return.
2. You establish that at the time you signed the joint return you did not know, and had no reason to know, that there was an understatement of tax.
3. Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax.
To qualify for “separation of liability relief” you must have filed a joint return and must meet one of the following requirements at the time you request relief:
1. You are divorced or legally separated from the spouse with whom you filed the joint return for which you are requesting relief
2. You are widowed
3. You have not been a member of the same household as the spouse with whom you filed the joint return at any time during the 12-month period ending on the date you file Form 8857 (PDF), Request for Innocent Spouse Relief.
If, at the time you signed the joint return, you had actual knowledge of the item that gave rise to the understatement of tax, you may not qualify for separation of liability relief.
You may qualify for “equitable relief” if you do not qualify for innocent spouse relief or separation of liability relief. Equitable relief is available for additional tax owed because of a reporting error (an understatement) or you properly reported the tax on your return, but you did not pay it (an underpayment). To qualify for equitable relief you must establish, under all the facts and circumstances, that it would be unfair to hold you liable for the understatement or underpayment of tax. In addition, you must meet other requirements listed in Publication 971, Innocent Spouse Relief.
If you request relief from joint liability, the IRS is required to notify the spouse with whom you filed the joint return of your request and allow him or her to provide information for consideration regarding your claim.
If you lived in a community property state and filed as “married filing separate” rather than “married filing jointly”, you might still qualify for relief. Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Refer to Publication 971 for more details.
