Husband filed chapter 13 but IRS now after me

[treize]

My husband filed chapter 13 back in 2012 and it was recently discharged for him - yay - it's been a really tough 5 years for us. We've always filed joint tax returns but only he declared bankruptcy. This past week I received a bill from the IRS for $36,000 for penalties and late fees for 2008 and 2009 taxes which were part of the bankruptcy. He paid all the taxes owed but his fees and penalties were forgiven as a part of his bankruptcy. Now that it is over, they are coming to me for those fees and penalties. We had no idea that I would be liable for the fees and penalties that were forgiven. Does anyone have experience with this? Is there any hope of negotiating down some of those fees?

[despritfreya]

Welcome to the Forum. Unfortunately your situation just tells me that you should have filed with your husband. Did he have an attny? What was the reason for you not filing? What state?

Des.

[treize]

yes he did have an attorney who failed to advise him that i should be included. massachusetts

[despritfreya]

So the problem is that since you are not in a community property state, your husband's discharge does not protect you from any "joint" obligation listed in that bk. While I cannot second guess what transpired prior to filing (the decision to not put you in the bk), personally, even in my state (community property) I want both spouses in unless there is a darn good reason not to do so.

Regardless, I would imagine that you may now need to file bk. Maybe it is a simple Chapter 7 - assuming that the portion of the taxes that remain are "dischargeable" and you "qualify". You need to discuss this with a bk attny (not the one your husband used). Please make an appointment sooner rather than later as you will want to get a handle on this rather quickly. Between now and then, do not panic. There is always a solution.

Keep us posted.

Des.

[dmc-2008]

Omg! That is insane! Keep us posted! I am always kind of envious of couples that dont file together because the can use the credit of the spouse with good credit! But this? Crazy! I am so sorry but yes there is always a solution! Keep us posted!

[treize]

I spent 4 straight hours on the phone today with the IRS, bouncing from one department to another. I was hoping for answers to a couple of questions but kept getting the answer that they didn't know b/c it was not their department but they would connect me to the relevant dept. I wanted to know 2 things: If it was determined through my husband's bankruptcy in 2011 (not 2012 as I first wrote) that there was a penalty amount owed that would be forgiven, then why did the IRS wait 5 years to send me a notice that I owed the penalty along with a failure to pay penalty? 2) the second page of my bill says (under failure to pay penalties) that they will charge up to 25% of the amount due. My first amount due for 2008 is $15000 with a failure to pay penalty of $14000 - - that's almost 100%, not 25%. The second penalty bill due for 2009 is $1000 with a failure to pay penalty of $3000 - - 300%!!!! How can this be? This is usury! I finally landed on the non streamlined agreement department who advised me to write to the IRS office in Fresno for an offer in compromise and explain my situation. He gave me an 8 week stay to sort it out. These 2 bills that I owe are more than I make in a year. I'm hoping that they will give me an abatement somehow so that I don't have to file chapter 7. It's been such a long and arduous process and very painful trying to make ends meet while we were struggling to make the payments. Do you think that a different bankruptcy attorney can help me other than filing chapter 7?

[despritfreya]

Do you think that a different bankruptcy attorney can help me other than filing chapter 7?

Not really. Attnys who only do bk know one thing, bk. Maybe look for an attny who handles tax matters.

Des.

[treize]

Thank you, Des. The reason I want to avoid Chapter 7 is that I am on the title to my mother's house where she lives and also I am joint on her bank account. She is 89 years old and I do all the paperwork for her. She has helped us so much through our Chapter 13 and I'm afraid that the IRS will get her through me if I do a Chapter 7.

[LadyInTheRed]

I hate to throw bad news on top of bad news, but your mother's house and bank account may be at risk even if you don't file BK. It will depend on state law, how you hold title to the home and how and why you obtained title. Because of the house, I think you should get the advice of a tax attorney before you send in an offer in compromise. You might also start consulting with BK attorneys in case you end up having to file BK.

If you held title to your mother's house when your husband filed BK, that may be the reason the lawyer didn't tell you that you should file too.

Here is a link to the IRS web page on offers in compromise: https://www.irs.gov/individuals/offer-in-compromise-1

If the penalties are due to income of your husband that was not reported on the tax return and you were not aware of the unreported income, you might also want to look into innocent spouse relief: https://www.irs.gov/taxtopics/tc205.html

[dmc-2008]

Can she write the title to someone else to protect her mom while this is getting straightened out Des?

OP i am sorry you are dealing with this! I too an afraid that at the long five year bk pricess that something will happen to make it not worth it! 😔

[despritfreya]

Can she write the title to someone else to protect her mom while this is getting straightened out Des?

Outside of the context of a bk I cannot answer. Inside the context of a bk, a transfer will look bad. Quite frankly, from what OP is describing, she is simply on title for estate planning purposes. She has no equitable interest in the property. This is not typically a problem in the context of a Chapter 7 since a Chapter 7 Trustee gets what the debtor has, which, in this case, is 1/2 bare legal title but no equitable interest (unless mom passes). As to the bank account, I assume OP has not deposited any of her money into it. Therefore, and once again, she has no equitable interest. A good bk attny would know how to handle this in the bk.

Also, remember, OP's husband filed a Chapter 13. The issue with the mom's home and bank account would have been a non-issue in that case. So, I am back to asking why would the attny advise her not to file with her husband.

Des.