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Failure to File, Back Taxes, Divorce, and Claiming Dependents

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LdiJ

Senior Member
Yes, that's what I figured, but was unsure about the issue of claiming dependents, which is what I was specifically asking about.

As far as not being familiar with the nitty gritty details, that's just not the case.

Thanks.
Well, you are not sharing them here, so he needs to see a tax professional that he can share them with, because the nitty gritty details DO matter.
 

Taxing Matters

Overtaxed Member
Do you know the statute of limitations off hand?
The basic rule is that the IRS has 3 years from the date the return is filed to assess any additional tax for that return. But there are several circumstances that can extend that time. LdiJ mentioned one of them, which is fraud. If fraud was committed then there is no SOL. Also, if the taxpayer understates income by 25% or more the SOL becomes 6 years instead of 3. If the taxpayer files bankruptcy the SOL is extended during the period that the automatic stay is in place, plus 30 days. The SOL is also extended for any time that the taxpayer is outside the U.S. There are a few more situations that can extend the SOL but they are not very common and very few taxpayers would encounter them.

Similarly there is a lookback rule that says a taxpayer cannot get a refund of tax except for tax that was paid within 3 years of the return due date or tax paid within two years from the date the refund claim is filed, whichever is later. Since withholding and estimated tax credits are considered to be paid on the due date of the return, this means that in most cases if you file a return claiming a refund more than 3 years after the due date you are going to lose that refund.

If the IRS prepared assessments against the husband because the husband failed to file timely and failed to respond to all the notices the IRS sent to him about it he may still be able to get the tax reduced by filing accurate returns now, though technically those would be considered amended returns at this point. He may also be able to get the wage levy (the term garnishment is not used in federal tax law) released. He needs to contact the collection office that issued the levy to work on that. He will likely need to submit a financial statement form (433A and perhaps 433B as well, or 433F) and make arrangements to pay to get the levy lifted. Unfortunately by waiting as long as he did to address it, he's going to pay a whole lot more than had he filed on time. He's getting hit with the late filing penalty, which is one of the largest civil penalties there is in federal tax law other than the late deposit penalty for employment taxes and the fraud penalty. He's also getting hit with a 1% per month late payment penalty that would have only been 0.25% per month had he entered into an installment agreement before the IRS sent out the notice of intent to levy, which would have preceded the wage levy by at least 30 days. Waiting to file tax returns rarely works out well. Most of the time it ends up being costly to the taxpayer, as is likely the case here. He likely could have saved a bunch of money filing on time, especially if they filed joint returns during the years of their marriage.
 
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