Law Office Of David C. Dodge, Inc. A Professional Corporation

I.R.S. Tax Lien & Collection Solutions

Newsletter For Businesses And Individuals

Second

DID YOUR SPOUSE CAUSE
YOU TO OWE TAXES?

You can save a bundle of cash and property if your spouse or ex-spouse unfairly left you with a huge tax liability that the IRS is trying to collect from you. My last issue of IRS Tax Lien & Collection Solutions discussed three ways you can get INNOCENT SPOUSE RELIEF: where (1) you did not know your spouse understated tax due, (2) you elect separate liability, or (3) it is not FAIR to hold you liable. This article addresses the third way - FAIRNESS, which the new law calls "Equitable Relief."

On December 7, 1998, the IRS published interim guidelines interpreting what "fairness" means in the new INNOCENT SPOUSE law that went into effect on July 22, 1998. The problem facing many spouses is that they signed a joint income tax return which allows the IRS to collect income tax from either spouse. So the tax misdeeds of one spouse often unjustly affect the innocent spouse when the IRS attempts to collect tax, interest, and penalties against the innocent spouse.

How To Get INNOCENT SPOUSE RELIEF When In Fairness, The Innocent Spouse Should Not Be Liable Even Though A Joint Income Tax Return Was Filed. To get innocent spouse relief, the innocent spouse simply needs to ask the IRS in letter format (soon there will be a special form) for relief stating the reasons it would be unfair to hold the innocent spouse liable. While an innocent spouse is allowed to represent himself or herself, it would be a huge mistake to do so - hire a competent lawyer!

To get "fairness" relief, the following preliminary conditions must be met:
(A) the innocent spouse filed a joint income tax return for the year relief is sought;
(B) innocent spouse relief is otherwise unavailable under conditions (1) and (2) above;
(C) the innocent spouse applies for relief no later than two years after the date the IRS first tries to collect from the innocent spouse;
(D) in most instances, the tax due is unpaid; and
(E) there is the absence of fraud or asset transfers to evade payment of tax.

The Bottom Line. Innocent spouses can get the IRS to forgive and not attempt collection for unpaid taxes, interest, and penalties where, under all facts and circumstances, it would be UNFAIR to hold the innocent spouse liable.

GETTING AN OFFER IN COMPROMISE ACCEPTED
IS NOW EASIER THAN EVER BEFORE!

An offer in compromise is one of the best ways to fully settle past due tax, interest, and penalties for pennies on the dollar.

The IRS Restructuring and Reform Act of 1998 President Clinton signed into law on July 22, 1998, has made offers in compromise easier than ever to get accepted. Prior to this Act, a major impediment to acceptance was that the IRS would only consider expenses it considered necessary for where the taxpayer lived. Also, the

IRS viewed unsecured creditor payments (ie. credit card payments) as an unnecessary expense. Often, the IRS determined "necessary" expenses were far less than the taxpayer's actual necessary expenses which caused the offer amount to unfairly increase to a level the taxpayer could not afford to pay. Thus, the IRS successfully rejected a vast majority of offers in compromise.

Under the new law, the IRS may not reject an offer in compromise solely on the use what it considers "necessary" expenses. Instead, the IRS must look at the circumstances of each taxpayer in determining what are necessary expenses.

When an offer in compromise is given to the IRS, it may not continue enforced collection in most circumstances. There has never been a better time to settle tax liabilities with an offer in compromise.

This newsletter does not represent legal advice - it is a general information tool.

This newsletter is authored by David C. Dodge, JD, CPA, MBA, EA. He is a practicing civil and criminal tax litigation lawyer. His practice includes tax collection representation. His main office is located at David C. Dodge, Inc., 19200 Von Karman Avenue, Suite 400, Irvine, CA 92646.

Telephone: (714) 378-4355
Facsimile: (714) 963-1115
Email: ATaxLawyer@aol.com