Long question about taxes-repost?

Question

When I was 18 I bought a home through USDA rural development, with only my name on the mortgage. (My boyfriend and I in the house with my daughter but since we weren't married they didn't put his name on the loan and they told me if we weren't married by the time we closed on it, he would never be responsible for the debt.) Soon after we moved in, we got married and he went off to basic training for the army. We ended up getting stationed in Georgia, halfway across the country and decided to rent out the house. To make a long story short, the renting didn't work out and I got stuck with that house payment and my new rent where my husband is stationed. I am a few payments late on that mortgage as it is and I am considering just doing a buy-back or whatever the technical term for that is because we didn't anticipate this happening and we can't pay two house payments.

I stay at home with my kids instead of working because my husband is in Iraq right now. I know since I haven't worked
at all this year that I do not have to file taxes. But I also know however if my husband and I file jointly they can take out all the money that I owe to the USDA (because it is a branch of the government) from our refund because they did that last year with $400 of our refund that I was short on the mortgage payment. So my question is, can my husband file Married filing Separately with the kids so they don't take any of the money that I owe out of his refund? Thanks in advance, please only answer if you are sure about the answer.

PS IT sure would be nice to have a little bit of spare cash when he comes home for his R&R in January

Answer 1

Hi, Here is my long answer for your long question.

Married Filing Jointly (MFJ) is the most beneficial filing status for you. Because you wll have higher deductions and credits that will reduce your taxable income and tax liability. Your sound like you read and know somethings, so hopefully below information will help you to make sure to do everything legally and have some cash.

Your husband can be an injured spouse since he is not legally liable for the USDA debt. An injured spouse is a taxpayer who files a joint return and all or part of a refund is, or is expected to be, applied against debts of the other spouse. The following debts apply for this purpose:

Past-due federal tax.
Child or spousal support.
Federal non-tax debt (such as a student loan).
State income tax.

File Form 8379 - "Injured Spouse Claim and Allocation" if all three of the following apply:
- The spouse is not required to pay the past-due amount,
- The spouse reported income such as wages, taxable interest, etc., on the joint return, and
- The spouse made payments such as federal income tax withheld or estimated payments, or claimed the EIC or other refundable credit on the joint return.

! Exception: If the main home of the injured spouse was in a community property state (AZ, CA, ID, LA, NV, NM, TX, WA, WI), the spouse may file Form 8379 if only item (1) above applies.

! Filing. Form 8379 may be filed with the tax return. If the return was already filed, send Form 8379 by itself to the IRS center for the place the injured spouse lived when the return was filed.

! Allocation. Part II of Form 8379 lists income and withholding amounts shown on the joint return, amounts allocated to the injured spouse, and amounts allocated to the other spouse. The IRS will figure the amount of any refund due the injured spouse.

Remember your mortgage interest payments are deductible, if you itemize.

Answer 2

Here is your Christmas present early. You and your husband can file a "Married, Filing Joint" return; you simply have to include with your filing a Form 8379....which is an Injured Spouse Allocation. This form erects a brick wall between the refund of yours and your husbands; his refund cannot be touched for any indebtedness of yours; but he still gets your exemption on the return and yada. Since you did not work you have no income and no tax due or refund coming to you. If you do your return yourself just fill out the 8379 and designate your husband as the "Injured Spouse" by checking the indicated box. Merry Christmas.

Answer 3

By all means file married filing jointly. If you don't you won't be entitled to the $1,000 child credit and earned income credit if you otherwise qualify.

Contact whatever family services agency there is where your husband is stationed and see if they can give you some guidance on how you can resolve the problem with the first house. USDA does not want to foreclose, it just wants to get its payments. You may be able to list the house for sale with a local broker or contract with a rental agency to professionally manage it for you.

Answer 4

OFFICIALLY, try the tax returns all legal ways.

However, I think you will find that filing MFJ with an injured spouse form is the best bet. The MFS return doesn't allow him to claim EIC, for example.

While you didn't work, you appear to have rental income so you will have to file.

One thing you didn't tell us is which state you are domiciled in. If it's California, you really can't do much about this.

Answer 5

It depends on the State of residence for your husband, where he lived when he was first enlisted.

A Tax Attorney could be able to find a loophole for you, talk to a CPA or Tax Attorney. Attorneys will give you one free consultation.

Call your lender and discuss options for your mortgage. many situations can be fixed by talking to your lender.