divorce and irs

[poiduke]

What is the name of your state? wi
No fault divorce none contentested, using leagle aide. Is now concerned that while during the 2 year marraige we filed single rather than married separte. Is this an issue? If so what and how?

 

[LdiJ]

What is the name of your state? wi
No fault divorce none contentested, using leagle aide. Is now concerned that while during the 2 year marraige we filed single rather than married separte. Is this an issue? If so what and how?

Who is concerned about this?

In terms of taxes you should certainly be concerned (particularly if you have minor children) because you committed serious tax fraud.

However, in terms of the divorce it should be irrelevant.

 

[poiduke]

The legal aide is concerned. There are no children. Could you explain the issue please.

 

[tranquility]

The concern is multifold. First, the tax rate you paid was less than you should have. Second and also, there are many rules on how you must treat income and deductions when you are married filing seperate which can substantially affect your tax return. While "fraud" may be a bit much as there needs to be an intent, you have filed incorrectly.

You will need to file amended tax returns for the years in question and there will almost assuredly be additional tax, penalties and interest due. Failing to amend the return before the IRS catches you could bring up the fraud issue, but I don't think someone in your situation would be prosecuted.

 

[LdiJ]

The concern is multifold. First, the tax rate you paid was less than you should have. Second and also, there are many rules on how you must treat income and deductions when you are married filing seperate which can substantially affect your tax return. While "fraud" may be a bit much as there needs to be an intent, you have filed incorrectly.

You will need to file amended tax returns for the years in question and there will almost assuredly be additional tax, penalties and interest due. Failing to amend the return before the IRS catches you could bring up the fraud issue, but I don't think someone in your situation would be prosecuted.

Actually, someone in their circumstances might not even get caught, but I just dealt with some clients over the last week in VERY similar circumstances.

It was the same thing...a divorce and the divorce brought to light the fact that they were not filing properly. The IRS got wind of it due to attorney requests for transcripts (with proper releases) to prove that the returns copies that were provided were accurate.

The IRS gave them 45 days to amend the original returns or they would consider the original returns to be fraudulent.

I had another set of clients recently that are going through bankruptcy, and again the IRS got wind of improper filing status through transcript requests...with similar results.

The IRS has hired about 15,000 new employees/auditors to specifically monitor these types of "cheating"....and has made their agents responsible for picking up on and reporting these kinds of issues (particularly if EIC is involved..which is almost always the case).

So fraud isn't necessarily a "bit much". Not any more. There are enormous quantities of people who have received EIC fraudulently and the IRS is working HARD to stamp that out.

When EIC is not involved its not a tremendous issue...but if they get wind of it they do "stomp" on it.

 

[tranquility]

Ah..the audit lottery. In her case I suspect the main risk is the cost of interest, although penalties are sometimes forgiven if the taxpayer comes clean before the IRS starts the audit. The odds of winning the lottery are great, but go down during divorce as bitterness sometimes makes people crazy talkers.

The IRS chance to the couple to amend after telling them of the issue would sure take care of the intent problem. Not that they had to, just that they did.

EIC is clearly one of the areas were a taxpayer could get inordinate benefits from the status change and, because of the rules to get the credit, I would be more likely to infer intent if the person were caught. When the government gives money "back" it never took in, it checks things much closer and the lottery odds go way down. I agree EIC fraud is a major focus for the IRS right now.

 

[LdiJ]

For quite a long time the "audit lottery" hasn't been a significant issue for individual taxpayers. The IRS took their focus away from indiivdual taxpayers.

However that has changed over the last couple of years, and is continuing to change.

I agree that EIC is the main focus, but its not the only focus.