Attorney
The divorce that came with a tax bill
Illustrative example. Not an actual client.
The facts
Divorce representation. The attorney retained 21 Century for the tax side of the matter. Before the separation, the couple’s preparer had answered an IRS income notice, and the tax was assessed.
Tax work. The client’s share of a joint refund had been taken toward the balance, and settlement terms were still open.
- The unreported income came from the spouse’s side business, and the client had no part in it and no access to its accounts
- She may qualify to request relief from her spouse’s tax debt
- Her share of the seized refund could be claimed
- The draft settlement needed accurate tax numbers
- Relief from a Spouse’s Tax Debt
- Recover Your Share of a Seized Refund
- Divorce Tax Planning
Spouse relief requested with supporting documents, and a claim filed for the client’s share of the refund. The settlement was signed with the tax debt assigned to the right person.
The client files separately, with withholding set correctly from the first year.
The attorney retained 21 Century directly, so the tax work stayed under the attorney’s direction, and signed the settlement with real tax numbers.
The story
She found out about the side business the same way she found out about a lot of things that year: in discovery.
Her husband had been doing contract work on weekends and never reported it. When the IRS caught it, the tax was assessed on their joint return. Then her share of their refund disappeared to pay it.
She was about to sign a settlement that split everything down the middle, including a tax bill for income she had never seen.