Question About Taxes

[Raina]

Okay, if you're not American, you might want to skip this thread because it's about income taxes, and likely to bore you to death.

Here's the situation. My boyfriend is recently divorced. He was legally married to his ex-wife until about two days ago. She wants to file taxes jointly with him for last year even though they did not live together at all. She also started a business in 2001 and ran it into the ground in 2002. She was also employed full time at another company for the entire year.

She keeps telling him that they should file married-jointly instead of married-separately because they will get more of a refund. (She has pulled numbers out of her ass saying they'll get anywhere from $300 to $600 more if they file together...depending on what day you talk to her. ).

My SO is as unsavy about taxes as I am, and he's not sure what to do. I think he should distance himself from her financially as much as possible. The business she ran was not well thought out, and I'm not entirely sure she and her business partner paid their taxes properly.

So, what we're looking for here is advice basically. Should he file with her or separately? What are the differences between filing jointly and filing separately? In the event that her business gets audited in the future, would my SO be liable either way? He also wants to try to go back to school this fall. I know that for financial aid, they look at your income taxes for the previous year. Would it be better if he filed separately?

He'll probably end up getting an opinion from an accountant before he files, but we were curious as to what input anyone here has.

 

[Weevil]

Just for the record the answer to 90% of questions about men from Texas is "small cocks"

 

[Raina]

Just for the record the answer to 90% of questions about men from Texas is "small cocks"

Gee thanks Weevil. I'll keep that in mind.

 

[Weevil]

I live to give.

 

[Spinaroonie]

I have an uncle who lives in taxes.

 

[Raina]

I have an uncle who lives in taxes.

^ -1 Lacking Originality.

 

[lavender]

Talk to the accountant. It depends on the circumstances.

 

[Raina]

Thanks Lav. We plan on doing that as well. We've just been discussing it all evening, and decided we were bored enough to try to get some other views.

 

[Ishmael]

Okay, if you're not American, you might want to skip this thread because it's about income taxes, and likely to bore you to death.

Here's the situation. My boyfriend is recently divorced. He was legally married to his ex-wife until about two days ago. She wants to file taxes jointly with him for last year even though they did not live together at all. She also started a business in 2001 and ran it into the ground in 2002. She was also employed full time at another company for the entire year.

She keeps telling him that they should file married-jointly instead of married-separately because they will get more of a refund. (She has pulled numbers out of her ass saying they'll get anywhere from $300 to $600 more if they file together...depending on what day you talk to her. ).

My SO is as unsavy about taxes as I am, and he's not sure what to do. I think he should distance himself from her financially as much as possible. The business she ran was not well thought out, and I'm not entirely sure she and her business partner paid their taxes properly.

So, what we're looking for here is advice basically. Should he file with her or separately? What are the differences between filing jointly and filing separately? In the event that her business gets audited in the future, would my SO be liable either way? He also wants to try to go back to school this fall. I know that for financial aid, they look at your income taxes for the previous year. Would it be better if he filed separately?

He'll probably end up getting an opinion from an accountant before he files, but we were curious as to what input anyone here has.

You provided no informatin that an opinion could be formed on. Tell him to get a tax guy.

Ishmael

 

[Raina]

Re: Re: Question About Taxes

You provided no informatin that an opinion could be formed on. Tell him to get a tax guy.

Ishmael

Umm. Thanks.

General tax information about the differences between filing married-jointly and married-separately would be welcome....*sigh* Never mind.

 

[Neotragii]

In order to make my answer somewhat short I'm going to focus on one question you asked, "would my SO be liable?" Yes.

Once you sign your name under the jurat statement you take on any debt present and future that the return may incur. Federal tax law allows you to file separately and later amend to joint, it does not allow you to do the reverse however unless you can prove fraud, coercion, etc..

If he is at all in doubt as to her business dealings I would not file joint.

 

[Neotragii]

General info: If they file as married filing joint and one of them itemizes their deductions then the other must also.

If they file married filing joint there are certain refundable and non-refundable credits that you cannot take. These mostly pertain to credits based upon having a qualifying child.

You don't mention kids so not sure if it even comes into play. There are so many variables in this situation, it would probably be easiest to figure three returns, one married filing joint and two married filing sep(we won't even get into the fact that one may qualify for head of household). I still think the deciding factor is the question I tackled in my last post.

 

[Raina]

General info: If they file as married filing joint and one of them itemizes their deductions then the other must also.

If they file married filing joint there are certain refundable and non-refundable credits that you cannot take. These mostly pertain to credits based upon having a qualifying child.

You don't mention kids so not sure if it even comes into play. There are so many variables in this situation, it would probably be easiest to figure three returns, one married filing joint and two married filing sep(we won't even get into the fact that one may qualify for head of household). I still think the deciding factor is the question I tackled in my last post.

No, there are no kids involved.

I've been looking on the IRS website, and I looked at the credits that you cannot take if you file separately, and none of them seem to apply in this situation.

It also states that it is the method to use if you want to be responsible for your own tax and that is pretty much what we are looking for.

We'll definitely be discussing the matter with an accountant, but we wanted to get a little bit of an idea about things ahead of time.

Thank you so much for your information!

 

[The Heretic]

My advice would be to file separately even if he would get more of a refund jointly. I would be suspicious of any hidden tax liability the ex may have due to her failed business, or even any debt liability (although I am not at all sure about that).

There is a fairly easy way to tell which way would be better with regards to how much tax is paid; fill out the forms both ways and see which way pays less tax. But I would still be afraid of her tax liability.

 

[Mountain Man]

see this IRS fileIRS pub 504

It describes divorced or separated individuals.

If she ran a business into the ground in 2002...there may be substantial losses for tax purposes so it might be benificial for hi to do.

You didn't say what state they were from. They need to see if they are in a community property state. Makes a difference.

Best advice is to talk to an accountant...a CPA is better.

 

[bknight2602]

Just for the record the answer to 90% of questions about men from Texas is "small cocks"

LMAO

 

[Raina]

Thanks Mountain Man and Heretic. I really am grateful for your replies.

You've helped me come up with a couple of other questions that we can ask the CPA that we probably would never have thought of.


MM, we're in Idaho. Yes, it's a community property state.

Heretic...as for filling out the forms both ways, we've considered it, the problem is, if it looks like they pay less taxes jointly (and it probably will) he'll have a harder time telling her that he still wants to file separately.

 

[RobDownSouth]

okay, usual disclaimer about not being a professional and seeing a CPA, yada yada yada...

Almost always, people filing jointly pay less than people filing seperately.

The gotcha is the money losing business.

If the IRS determines that the business was never intended to make a profit, it will be declared a hobby and losses will be limited to something around $1000. If it is a legit (i.e. ongoing, for-profit business), youre okay, and will even benefit from the loss offsetting taxes.

The difference can be substantial...I'd say, all things being equal..if YOU think the business was more of a hobby, file seperate, otherwise go joint.

 

[Weird Harold]

Heretic...as for filling out the forms both ways, we've considered it, the problem is, if it looks like they pay less taxes jointly (and it probably will) he'll have a harder time telling her that he still wants to file separately.

1: They probablywill pay less jointly than they will separately if their combined AGI is over $6,000 -- that's where the tax for married filing separately and marrid filing jointly starts to diverge on on the tax tables.

2: You haven't mentioned the most important questions:
Who gets the refund check?
How do they divide up the refund?

 

[Raina]

1: They probablywill pay less jointly than they will separately if their combined AGI is over $6,000 -- that's where the tax for married filing separately and marrid filing jointly starts to diverge on on the tax tables.

2: You haven't mentioned the most important questions:
Who gets the refund check?
How do they divide up the refund?

Ah yes, who gets the $$ that is the question. She says that they will split the refund check, but in reality, it will probably all go towards paying off a loan that she took out while they were still married that she has gone into default for.

My SO's thoughts are that he will file separately so he is (hopefully) less likely to be held accountable for her business taxes and loans in the event of an audit. He will also take over her defaulted loan, since the next step for the loan company is likely going to be coming after him anyway. Of course, he is still going to get the advice of a good CPA, but this is the direction he's leaning at the moment.

Either way he gets screwed, but that's nothing new in his dealings with her.

 

[Weird Harold]

My SO's thoughts are that he will file separately so he is (hopefully) less likely to be held accountable for her business taxes and loans in the event of an audit. He will also take over her defaulted loan, since the next step for the loan company is likely going to be coming after him anyway.

If he's going to take over the loan anyway, then he should probably file jointly to get as much back as possible.

If the loan is in her name only, then he shouldn't take responsibility for it voluntarily -- and see a lawyer about what his liability for repaying her loan is.

 

[Raina]

If he's going to take over the loan anyway, then he should probably file jointly to get as much back as possible.

If the loan is in her name only, then he shouldn't take responsibility for it voluntarily -- and see a lawyer about what his liability for repaying her loan is.

Yes, they'd probably get back a lot more by filing together. That's why we want to be sure to look at all the particulars. The possiblilty of more money is surely an issue. However, he's willing to give up the extra $$ and pay a bit more in taxes to establish his income as separate from hers and to keep as far away from her business fiasco as possible.

He probably will take over the loan no matter what because he's just a big softy, and has a hard time saying no. If it were up to me, he'd let her deal with her own mistakes and fight the possibility of being held accountable for the loan. It's in her name entirely, but they were married at the time it was taken out...and Idaho is a community property state. I think that makes him liable to some extent. (I'm fuzzy on this part. We'd probably have to talk to lawyers on this.)

As for the tax issue, if a CPA says filing jointly won't make much difference except for the money, and he could still be audited and held accoutnable for her business, even if they filed separate... then he'll probably go ahead and file jointly....I think it mostly rests on the matter of the failed business, rather than the money. Like I said, it wasn't a very well thought out venture, it went under in about 9 months...and there are creditors who are after her for rather large sums of money (the loan that he will take over has no ties to the business). There's also the issue of student financial aid. He's talked to a fin-aid councellor a little about it, and from what she said, it seems that separately would be better if he wants to apply for financial aid this year. If he waits until next year to apply for aid, however, it won't make much of a difference either way.

I realize that there's not much that can be decided without talking to an accountant, but just getting everyone's ideas has been immensely helpful. I've got a list of questions for him to ask the CPA.

He wanted me to make sure I thanked everyone who contributed their ideas to this thread. We both appreciate it.

 

[svenmn]

Yes, they'd probably get back a lot more by filing together. That's why we want to be sure to look at all the particulars. The possiblilty of more money is surely an issue. However, he's willing to give up the extra $$ and pay a bit more in taxes to establish his income as separate from hers and to keep as far away from her business fiasco as possible.

He probably will take over the loan no matter what because he's just a big softy, and has a hard time saying no. If it were up to me, he'd let her deal with her own mistakes and fight the possibility of being held accountable for the loan. It's in her name entirely, but they were married at the time it was taken out...and Idaho is a community property state. I think that makes him liable to some extent. (I'm fuzzy on this part. We'd probably have to talk to lawyers on this.)

As for the tax issue, if a CPA says filing jointly won't make much difference except for the money, and he could still be audited and held accoutnable for her business, even if they filed separate... then he'll probably go ahead and file jointly....I think it mostly rests on the matter of the failed business, rather than the money. Like I said, it wasn't a very well thought out venture, it went under in about 9 months...and there are creditors who are after her for rather large sums of money (the loan that he will take over has no ties to the business). There's also the issue of student financial aid. He's talked to a fin-aid councellor a little about it, and from what she said, it seems that separately would be better if he wants to apply for financial aid this year. If he waits until next year to apply for aid, however, it won't make much of a difference either way.

I realize that there's not much that can be decided without talking to an accountant, but just getting everyone's ideas has been immensely helpful. I've got a list of questions for him to ask the CPA.

He wanted me to make sure I thanked everyone who contributed their ideas to this thread. We both appreciate it.

Run don't walk to state society of CPA web site and find one fast.
Being this is my specialty he probably should have seen one before divorice was final and signed have know it to be put in decree who is responsible for tax liablility if standard lauguage is used they are both liable for tax due on prior years before divorice.

Run and run quickly

 

[Raina]

Run don't walk to state society of CPA web site and find one fast.
Being this is my specialty he probably should have seen one before divorice was final and signed have know it to be put in decree who is responsible for tax liablility if standard lauguage is used they are both liable for tax due on prior years before divorice.

Run and run quickly

Eep. You're giving me heart failure! I'm looking right now. I found the website, and State listings of CPA's.

So what you're saying is that it's probably too late. He's liable if she fucked up her business taxes. Well hopefully, she didn't fuck up. It's not like I have evidence that she did, I just don't have much faith in her business acumen. *sigh*

I know the divorce was pretty much basic. There were no kids or property involved, so it was pretty cut-and-dried. They did outline their debts. Who was to pay what, but I don't think it mentioned tax liability. Shit.

 

[svenmn]

Eep. You're giving me heart failure! I'm looking right now. I found the website, and State listings of CPA's.

So what you're saying is that it's probably too late. He's liable if she fucked up her business taxes. Well hopefully, she didn't fuck up. It's not like I have evidence that she did, I just don't have much faith in her business acumen. *sigh*

I know the divorce was pretty much basic. There were no kids or property involved, so it was pretty cut-and-dried. They did outline their debts. Who was to pay what, but I don't think it mentioned tax liability. Shit.

Sorry it sometimes happens they just agree to split tax liablilities. And away we go then come see CPA try to get it fixed.