Tax Court Says Spouse Was Not So Innocent

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In Constance H. Briley v. Commissioner of Internal Revenue, docket number 7782-17 (T.C. Memo. 2019-55), the Tax Court denied innocent spouse relief to a Virginia woman, who the court said had reason to know of an error on her joint tax returns.

Findings of Fact

Constance H. Briley married Mr. Briley in 1988. They were married during the years involved; and although they separated in 2013, they remained married as of the date of trial.

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Innocent spouse relief: Are you responsible for your spouse’s tax mistakes?

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When married taxpayers sign a joint return, they are jointly and severally liable for the taxes owed on the return.

Oftentimes a spouse will fail to report income or claim improper deductions or credits, without the other spouse knowing. In such cases, it might be grossly unfair to hold the innocent spouse liable for the other spouses’s mistakes.

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IRS Payment Plan

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The most common way to resolve tax debt issues by entering into a payment plan with the IRS. There are several types of payment plans.

Do you qualify for a payment plan?

The IRS will consider an installment agreement only if a taxpayer is current on his tax liabilities, which means that the taxpayer:

  1. has filed all tax returns
  2. and is current with tax payments for the current period, such as estimated tax payments

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How to Settle IRS Debt

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How to Settle IRS Debt

If you’re struggling with tax debt, you’re probably looking to learn how to settle IRS debt. This is a process known as an Offer in Compromise – Doubt as to Collectibility (OIC). While many taxpayers might think this requires “negotiating” or “playing tough” with the IRS, it’s actually all about the numbers.  Here’s how to settle your IRS debt through an OIC.

Step 1: Determine if you are Current on your Tax Obligations

You must be currently be in full compliance, which means:

  • You’ve filed all your tax returns that you are legally required to file
  • You’re having the correct amount of taxes withheld based on your Form W-4 or paying your estimated tax payments for the current year if you’re self-employed
  • Businesses must be making their current quarter’s payroll tax deposits
  • Continue to remain compliant through the rest of the process

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The Five Biggest Mistakes Made When Filing an Offer-in-Compromise!

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The Five Biggest Mistakes Made When Filing an Offer-in-Compromise!

The Internal Revenue Service’s (“IRS”) Offer-in-Compromise program continues to be one of the most popular programs with both practitioners and taxpayers when they are considering a way to resolve their back tax issue.  Yet, only 42% of Offers filed by taxpayers are ultimately accepted.  Why are less than half of the Offers filed being accepted? Read more about common offer in compromise mistakes.

Mistake #1: Not Checking the Statute of Limitations

There is a ten-year collection statute.  What this means is the IRS has ten years from the date it assesses the tax liability to collect that tax.  Easy enough.  However, taxpayers often do things that may toll or freeze the statute, preventing it from running.  These actions include anything that prevents the IRS from taking collection action, including:

  • Filing an Offer-in-Compromise
  • Filing bankruptcy
  • Filing a request for an installment agreement (payment plan)

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IRS Tax Liens

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IRS collections – Federal Tax Liens

Anyone who has been in trouble with IRS tax debt probably has some experience with a federal tax lien. Learn about what an IRS tax lien is, how it’s filed, and what you can do to get it released.

How a Federal Tax Lien is Created

After the IRS makes a tax assessment (when you file your return, through an audit adjustment, or an amended return filing), the IRS is required to give notice and demand for payment within 60 days. If the taxpayer fails to pay, a tax lien arises and attaches to all property owned on or after the date of the tax assessment. A lien continues until the underlying tax liability is satisfied. If it is not, then the lien will exist for the entire 10-year collections statute of limitations period.

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Guide to IRS Penalties

IRS Penalties, innocent spouse relief, seriously delinquent tax debt

Guide to IRS Penalties

There are many different types of penalties that the IRS can impose on individual and business taxpayers. Here are some of the more common IRS penalties.

Failure to File and Failure to Pay Penalty

Legal Authority

Legal authority for the IRS to assess penalties for failure to file and/or pay are provided by:

  1. IRC 6651 – provides for additions to tax for failure to file returns required to be filed to report tax, and for failure to pay tax required to be reported on those returns
  2. IRC 6698 provides for a penalty for failure to file a complete partnership return as required under IRC 6031.
  3. IRC 6699 provides for a penalty for failure to file a S-corporation return as required by IRC 6037.
  4. The penalty for failure to make required payments under IRC 7519(f)(4)(A).

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IRS Offer-in-Compromise vs. Chapter 7 Bankruptcy

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Settling Tax Debt: IRS Offer-in-Compromise vs. Chapter 7 Bankruptcy

A common misconception is that you cannot discharge federal tax debt in Chapter 7 bankruptcy. In fact you can both discharge some of your tax debts under Chapter 7 Bankruptcy, as well as settle your debts with an Offer in Compromise.

Chapter 7 Bankruptcy

Tax debt is dischargeable in Chapter 7 bankruptcy if they meet specific requirements under the Bankruptcy Code. These requirements are often called the 3-year, 2-year, and 240-day rules.

  1. The 3-year rule. The return was due at least three years ago before you file for bankruptcy. For example, Bob’s 2010 return was due on April 15, 2011. The earliest he can file for bankruptcy for his 2010 tax debt is April 15, 2014. Note that a tax return extension will also extend the 3-year rule.
  2. The 2-year rule. The return must be filed at least two years before the bankruptcy filing. For example, Bob’s 2010 return was due on April 15, 2011, but didn’t actually file his tax return until October 31, 2011. The earliest he can file for bankruptcy for his 2010 tax debt is October 31, 2013.
  3. The taxes were assessed at least 240 days ago. For most taxpayers, the taxes are considered assessed as of the date the return was filed. However, if you file an amended return or are audited and owe additional taxes, then the 240 days on the additional tax begins to run when the additional taxes are assessed.

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