Should my wife fear tax collections and bad credit because of my tax debt when I was single?

Question

I aquired a tax debt while single and am in collections currently (An installment agreement). I got married 3 years ago to a woman who has been a full time grad student from the beginning and has not earned enough to have to file taxes in those 3 years. She has insisted that we file married but seperately because she is afraid of collection actions against her because of my tax debt but because of this we are losing the tax benefit of filing jointly thus gaining more credit each year toward my debt (I've been filing 0 dependents and having the max tax taken out of my paycheck to get the highest returns which the IRS applies to my debt). We may have an opportunity to submit an offer in compromise soon and put this behind us. Should she fear bad credit, a collection action against her, etc if we change our status this year and possibly amend the previous years we been married to exellerate the reduction of the debt before and until we apply for the OIC?

Answer 1

If you file a joint return she can attach a Form 8379, Injured Spouse Allocation to protect her share of any refund. You should attach the form to your paper return and mail it in.

If she had no income, filing separate returns might not have been a good idea, actually. She has no refund to lose out on and you would have had a larger amount credited to your debt since joint returns attract less tax liability. You'd be able to use the various educational credits and deductions on a joint return as well, maximizing your refund and the amounts credited to your debt with the IRS. You may wish to discuss that with her.

Tip: If you live in a community property state, do NOT submit the Form 8379 if she has no income. If you do, she'll get a check for half of the refund and that will slow down the clearance of the debt. She could give you the money to send back to the IRS but why bother with the delay and hassle?

She cannot be held accountable for your debt that existed prior to your marriage. No collection actions can be taken against her for those debts.

She does have plenty to be concerned with about your credit rating, though. Any joint credit will be impacted by your poor credit score and will drive up credit costs for some years to come.

Answer 2

The way an offer in compromise works is they look at how much you owe, and compare that to have much money you have left over at the end of each month after necessities, add to that the value of any assets, and then see if you have the ability to pay the debt off during the time allowed by law (10 years from the date the taxes were due). If you can pay it off in that timeframe, then they will reject your OIC and put you on an installment agreement.

Thus, paying down the debt as much as possible before filing the OIC doesn't help your chances of getting the OIC accepted. If anything, it hurts them.

On the other hand, paying down the debt as much as possible is a great idea so that you can pay it off as soon as possible.

You say that you "may have an opportunity to submit an OIC." Why is that? Why do you need an opportunity? Can't you just submit the paperwork at any time?

If someone's telling you that they'll do it for you, possibly for a fee, then you should consider what your chances are of getting it accepted. If it's a small amount or if you can pay it off with an installment agreement, then you won't get your OIC accepted. So you should consider that before wasting time and money on it.

Answer 3

Bad credit is one of the worst problems to have... however there exists a solution.

I will hereby talk from my personal experience.

I did debt consolidation a couple of years ago, however If I had to do it again I would pay to some minor details,
if someone wants to get out of debt today it is pretty easy with a debt consolidation plan, however it may get a bit tricky at times, I suggest you get as much information as possible online on this first,

a good place to start in my humble opinion is astraight to the point ebook with question and answer I found :

http://umgarticles.atspace.com/debt-consolidation.htm

if it helps kindly remember me in your voting!.. cheers!

Answer 4

in case you don't know it, the IRS is required to assist you in filing your OIC, ,if you can get to an IRS office ask to see an Offer Specialist, i would file asap, write down name and ph # and what was said per each IRS conversation, anyone that is unhelpful or rude demand to speak to their supervisor. You really should not need the expense of professional help unless your offer is REJECTED, then you may want to talk to a professional (who has offer experience) for help.

Answer 5

Do not commingle money, accounts, or file together until your debt is completely discharged.