401K's and divorce

[mikacd]

What is the name of your state? Washington

Ok, here's my question: I seperated from my husband and moved out in April of '04. I did not file a legal seperation. I filed for divorce in July and it got finalized in Feb of '05. When we went to do our taxes a month later I found out that while we were seperated he took out 20k of his 401k without paying tax or penalty (without my knowledge). H&R block told us that we could not file seperately (exact words where: you can only file seperately if you do not know how to contact the other person and since he's sitting here beside you...). So instead of getting back a couple thousand like I thought I would we ended up owing over $4k.

And probably the worst mistake I made was trying to do the divorce online and not getting a lawyer. But it was so bad - I saved up for months to be able to afford to leave him. I left with my son, my clothes, my son's clothes and toys and a few pieces of furniture and that was it.

He said he would take full responsability and pay it. He set up a payment schedule with the IRS but now he won't pay it. The IRS sends me letters saying they are going to put a lien on my property. I own a house and my car, I raise our son so I don't have a lot of extra money. He lives in a dinky apt with a $300 car payment and makes over twice what I make and has more debt than income. He knows if he doesn't pay they will take it from me.

It just doesn't seem fair - he gets 20k and I have to pay the taxes and penalties on it. I had no idea of the money and never received any of it. Not that it has any bearing but that is pretty much the extent of my savings - the 2.5K the IRS wants now, which means no christmas or winter clothes for us. I will be lucky to be able to save enough to get us through the winter with food. I make a lot more money in the summer than in the winter and worked my but off last year to save up that money.

Am I just SOL or is there some recourse to this? Despite this being a community property state I had thought 401K's were exempt. And if the money withdrawed is not - then what do you do when you didn't know about it at the time of the divorce?

 

[seniorjudge]

...
H&R block told us that we could not file seperately (exact words where: you can only file seperately if you do not know how to contact the other person and since he's sitting here beside you...).
....

I am NOT a tax attorney.

But I do not believe this is correct.

Check with a real tax expert (i.e., a tax CPA) and see if y'all can file an amended return.

 

[LdiJ]

What is the name of your state? Washington

Ok, here's my question: I seperated from my husband and moved out in April of '04. I did not file a legal seperation. I filed for divorce in July and it got finalized in Feb of '05. When we went to do our taxes a month later I found out that while we were seperated he took out 20k of his 401k without paying tax or penalty (without my knowledge). H&R block told us that we could not file seperately (exact words where: you can only file seperately if you do not know how to contact the other person and since he's sitting here beside you...). So instead of getting back a couple thousand like I thought I would we ended up owing over $4k.

And probably the worst mistake I made was trying to do the divorce online and not getting a lawyer. But it was so bad - I saved up for months to be able to afford to leave him. I left with my son, my clothes, my son's clothes and toys and a few pieces of furniture and that was it.

He said he would take full responsability and pay it. He set up a payment schedule with the IRS but now he won't pay it. The IRS sends me letters saying they are going to put a lien on my property. I own a house and my car, I raise our son so I don't have a lot of extra money. He lives in a dinky apt with a $300 car payment and makes over twice what I make and has more debt than income. He knows if he doesn't pay they will take it from me.

It just doesn't seem fair - he gets 20k and I have to pay the taxes and penalties on it. I had no idea of the money and never received any of it. Not that it has any bearing but that is pretty much the extent of my savings - the 2.5K the IRS wants now, which means no christmas or winter clothes for us. I will be lucky to be able to save enough to get us through the winter with food. I make a lot more money in the summer than in the winter and worked my but off last year to save up that money.

Am I just SOL or is there some recourse to this? Despite this being a community property state I had thought 401K's were exempt. And if the money withdrawed is not - then what do you do when you didn't know about it at the time of the divorce?

This won't help your situation but I am going to seriously emphasize it for anyone else who might happen to read this post. (I am a tax professional)

The H & R Block agent flat out lied to you....no one is EVER legally required to file a joint return with their spouse or almost ex spouse or ex spouse under federal tax law.

However, since you did do so, so the IRS will hold you accountable for the tax. There is no recourse there.

However, you can negotiate an installment plan with the IRS yourself...you do not need to pay it all at once.

 

[TinkerBelleLuvr]

Ldij, having brain failure here. Is she past the point where they could file separate returns (MFS) for that year? I think she can't anymore, but my mind isn't working anymore.

Her only bet at this point is to get into an installment agreement with the IRS and to take her X to court for contempt of court - but only if it was in the divorce decree that he would take on this debt.

He said he would take full responsability and pay it.

was it in the divorce decree?

 

[LdiJ]

Ldij, having brain failure here. Is she past the point where they could file separate returns (MFS) for that year? I think she can't anymore, but my mind isn't working anymore.

Her only bet at this point is to get into an installment agreement with the IRS and to take her X to court for contempt of court - but only if it was in the divorce decree that he would take on this debt.

was it in the divorce decree?

You can amend separate returns to make them joint up until three years past the original deadline for filing the tax return. However, you cannot amend a joint return to make it separate returns once you are past the original April 15th deadline.

 

[TinkerBelleLuvr]

thanks LdiJ, I was pretty sure she couldn't split that return anymore.

 

[mikacd]

was it in the divorce decree?

Part of the problem is that I had no idea of all this until AFTER the divorce. He took out all the money of his 401k while we were seperated and during the waiting period of the divorce and never said anything about it until after the divorce was finalized.

 

[seniorjudge]

Part of the problem is that I had no idea of all this until AFTER the divorce. He took out all the money of his 401k while we were seperated and during the waiting period of the divorce and never said anything about it until after the divorce was finalized.

If you can prove all this, then you have a good grounds (i.e., fraud) for the modification of the judgment in your lawsuit.

 

[LdiJ]

If you can prove all this, then you have a good grounds (i.e., fraud) for the modification of the judgment in your lawsuit.

Maybe....but that doesn't change the tax problem. She signed a joint return with him knowing that this issue existed. She should have NEVER filed/signed the joint return.

She may have some action available civilly for the flat out lie that she was told by the H&R Block tax preparer, but its going to be a he said/she said situation. Unfortunately a preparer isn't going to admit that they either deliberately lied to her or just seriously messed up....

I can't give any advice that will retro that....but I can emphasize it over and over so that anyone else reading this thread will think twice before filing a joint return with their ex or soon to be ex.

I am seriously pissed off about this one, as a tax professional. This is not the same as a divorcing couple sharing an attorney....where the attorney only works for one of them. A tax professional is required to tell the full truth to ANYONE signing a tax return...and the tax professional in this case either lied or didn't know the heck what they were doing.