QUESTION
Why do they ask for household income when debt is for individual filer in IRS offered in compromise?
Asked on Nov 20th, 2013 on Taxation - California
More details to this question:
I am currently paying tax debt from years 2010-2012 through an installment agreement. My tax returns have always been filed timely, but I couldn't make the payments that were due with the returns. I was unmarried during those years, so the debt belongs solely to me. I am now unemployed and looking to make an offer in compromise to the IRS, since the penalties and fees they are charging me on a monthly basis through the installment agreement are as much as the principal balance owed and at this rate, I could never pay this off. I got married in September of 2013 and my spouse has a decent income. Why does the IRS ask about household income on the offer in compromise application and will that makes me ineligible for it? I accrued this debt when I was single and don't feel that my new husband should now be responsible for it. Thank you in advance for any insight you can provide.
3 ANSWERS
Business/ Commercial Attorney serving Bellevue, WA
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Lana Kurilova Rich PLLC
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Well, you live in the community property state, so your spouse's income is community property. Essentially, the IRS can look to half of that income, technically speaking, to pay your taxes even though your spouse had nothing to do with the tax debt you incurred. Also, even though your spouse is not liable, that income is basically available to you to support yourself. So while the IRS cannot really make your spouse pay your taxes, the IRS may count that income as available to you for your own financial support. So unfortunately, that request is valid.
Answered on Nov 21st, 2013 at 1:53 PM
Appellate Attorney serving Grosse Pointe Farms, MI
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Musilli Brennan Associates, PLLC
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See a tax attorney with the details and for counsel. Remember the IRS is not interested in fairness, they are looking to collect.
Answered on Nov 21st, 2013 at 1:53 PM
Mihaella Cornelia Smith
The IRS is asking for your household income in order to prorate the amount of household expenses for which you will receive credit. For example, if you bring in 20% of the household income, you will only receive credit for 20% of the shared household expenses, and 100% of your personal expenses. Be careful that the IRS will still allow 100% credit for your individual expenses. They may try to blanket all of your expenses under the prorated percentage.
Answered on Nov 21st, 2013 at 1:52 PM