is this legal?

[hurricanegirl]

Hi I am hoping for a CPA to answer

My husband is the sole priopriator of a small construction company. He files S - takes no salary and itemizes business deductions

I also file S and itemize all of my deductions

But, we are and have been married for over 30 years, and yes we have filed Single all of that time

[Deleted]

Do you mean you both file your 1040 and mark the box, 'single', rather than the box 'married filing separately'?

[Rocky Mtn Saver]

Is there a particular reason you haven't been Married Filing Jointly?

[hurricanegirl]

Archie - yes and we each take ourselves as an excemption

Rocky Mountain - yes, when we married my husband had entered into an "offer of compromise", and since I never co mingled (then or now) our money, I believe this was important in order to qualify as Innocent Spouse. It took about 5 years but that offer in compromise was accepted and paid.

During that time IRS did meet with us fairly regularly, and they did indicate that what I was doing (single status) was NOT Illegal.

Just wondering if things have changed

[Deleted]

Interesting... at the very least, you are probably overcharging yourself taxes by filing that way..

[Rocky Mtn Saver]

Jan 31, 2012 12:54:29 GMT -5 ArchietheDragon said:

Interesting... at the very least, you are probably overcharging yourself taxes by filing that way..

Generally, people only file single if they can't qualify for any of the more advantageous filing statuses.

[hurricanegirl]

Well, he takes quite a chunk of deductions (all business related)

As I indicated earlier I have never comingled our money, and I take all household deductions, mortgage interest (gone now), property taxes, energy saver credits, etc

Overall I believe it has worked out adventageous for us.

DH is 69 and still working, but once he stops, I may then do a Married, Joint

Yes, but is it legal?

[Deleted]

You should redo your last year's return as married and see if there is a difference in your favor. If so, you can refile the previous 3 years returns.

i think you are clear as far as the previous tax issue is concerned.

[Deleted]

Everything I have read says that a couple is married on the last day of the tax year they cannot file their taxes as single.

Here is one of the more professional looking websites that I found:::

Mon, March 09, 2009
If You’re Married, You Can’t File as Single

Sometimes truth is stranger than fiction. I’ve learned that it's not unheard-of for a professional tax preparer to advise a married individual to file his or her tax return using the single filer status. No! No! Bad tax preparer!

Last fall, one of my colleagues sought advice from a group of planners regarding a client whose CPA had advised him and his wife to file their returns separately using “single” filing status. His inquiry prompted a number of responses from other planners with similar experiences.

Here’s the problem: if you’re married as of the last day of a tax year, you cannot use the “single” filing status in that year. The very first section of the Internal Revenue Code provides that a married person must either file using “married filing jointly” or “married filing separate” status. There’s no option for such a person to file as “single.”

What might motivate someone to try to file using single status in this situation? Most likely, they believe that doing so will allow them to pay lower taxes. If two members of a couple have very different incomes, for example, it’s likely that they would owe lower total taxes if they could each file a single return. If they did this, they’d be committing tax fraud. There are various mistakes that a tax preparer could make, but this one is truly inexcusable. A preparer who gives this kind of advice should definitely be smacked with a rolled-up newspaper.

It’s often a good idea to hire a professional for tax advice, but you should question any advice that runs contrary to common sense. That’s surely the case here: if you’re married, why should you be able to file as “single?” If the advice you get ever seems dodgy, feel free to ask your tax adviser to point you to an IRS document or other legitimate source to justify what you’re being told.

ffscambridge.com/blog/post/if_youre_married_you_cant_file_as_single/

[Rocky Mtn Saver]

Below is what the IRS Pub 17 says about filing statuses. Note that there are no special rule allowances listed for Single filing status. It simply says you use it if you are unmarried/separated and can't use something else.

www.irs.gov/publications/p17/ch02.html#en_US_2011_publink1000170750

Single
Your filing status is single if, on the last day of the year, you are unmarried or legally separated from your spouse under a divorce or separate maintenance decree, and you do not qualify for another filing status. To determine your marital status on the last day of the year, see Marital Status , earlier.

Widow(er). Your filing status may be single if you were widowed before January 1, 2011, and did not remarry before the end of 2011. However, you might be able to use another filing status that will give you a lower tax. See Head of Household and Qualifying Widow(er) With Dependent Child , later, to see if you qualify.

Married Filing Jointly
You can choose married filing jointly as your filing status if you are married and both you and your spouse agree to file a joint return. On a joint return, you report your combined income and deduct your combined allowable expenses. You can file a joint return even if one of you had no income or deductions.

If you and your spouse decide to file a joint return, your tax may be lower than your combined tax for the other filing statuses. Also, your standard deduction (if you do not itemize deductions) may be higher, and you may qualify for tax benefits that do not apply to other filing statuses.

Married Filing Separately
You can choose married filing separately as your filing status if you are married. This filing status may benefit you if you want to be responsible only for your own tax or if it results in less tax than filing a joint return.

If you and your spouse do not agree to file a joint return, you may have to use this filing status unless you qualify for head of household status, discussed later.

[mwcpa]

"we are and have been married for over 30 years, and yes we have filed Single all of that time"

Single is Single.
and married is married.....unless you do not live the same household for the last 6 months of the year (and other requirements)

"Yes, but is it legal? "
probably not... seek professional help ASAP.... to undo this mess it is probably not a do it yourself proposition

[taxref]

I'm afraid you have a number of problems here.

Based on your message, you should not have filed single. You could have filed MFS to avoid joint liability, but not single. By not filing MFS, there is a good chance both of you have substanially understated your tax liabilities over the years.

Your discussions with the IRS about this must have included a good deal of misunderstanding on their part and/or your part. There has never been a rule that 2 married spouses can elect to file single.

I strongly second MWCPA's advice to see a tax professional (not a storefront tax prep company) ASAP.

[TheOtherMe]

Jan 31, 2012 20:36:22 GMT -5 taxref said:

I'm afraid you have a number of problems here.

Based on your message, you should not have filed single. You could have filed MFS to avoid joint liability, but not single. By not filing MFS, there is a good chance both of you have substanially understated your tax liabilities over the years.

Your discussions with the IRS about this must have included a good deal of misunderstanding on their part and/or your part. There has never been a rule that 2 married spouses can elect to file single.

I strongly second MWCPA's advice to see a tax professional (not a storefront tax prep company) ASAP.

Agree completely with this. There never, ever should have been two single returns filed once you were married. MFS would have been the proper way to go.

What I have bolded is very, very important. You do need to see a qualified tax pro to assist you. I also would not recommend a storefront tax prep company. You have some serious issues and need somebody more qualified than that.

[TheOtherMe]

Jan 31, 2012 13:06:16 GMT -5 hurricanegirl said:

Well, he takes quite a chunk of deductions (all business related)

As I indicated earlier I have never comingled our money, and I take all household deductions, mortgage interest (gone now), property taxes, energy saver credits, etc

Overall I believe it has worked out adventageous for us.

DH is 69 and still working, but once he stops, I may then do a Married, Joint

Yes, but is it legal?

By you claiming all of the household expenses, money commingled or not, you would owe taxes if you filed correctly as MFS if you didn't want to file with him. It is not a choice. You are required to file a either MFJ or MFS if you were living together and married.

Seek help soon.

[hurricanegirl]

And if I talk honestly to CPA is that like talking to a lawyer? Is it priviledged? Do they have to " turn me in"?

I have " gotten away with this" for over 30 years. What do I have to gain from coming clean now? (Other tha peace of mind?

Is it worth it to open a bag of worms??


Please dont misunderstand, as I get older I conform more and wamt to do things right.............................

[TheOtherMe]

I am not a CPA and do not know the answer about confidentiality between a CPA and their clients.

I do know that you are not in tax compliance. Perhaps one of the CPAs can answer your question. There is privilege if you hire an attorney.

[taxref]

Unlike an attorney, a CPA does not have privileged communication with a client. That being said, it would be a violation of professional ethics for a CPA to report you. If the CPA is given a valid subpoena or court order, however, he would be required to tell all.

At the very minimum, you need to begin filing your 2011 taxes correctly. I would also strongly advise amending your prior 3 year returns. Based on the fact that you filed single while being approved for an OIC (one cannot be an innocent spouse if one is not a spouse), I personally would recommend a tax attorney.

[TheOtherMe]

It is possible that this single filing while married, which is clearly wrong, could be looked at as fraud.

A good tax attorney is better advice than a CPA if you are concerned about privilege.

[Deleted]

Filing your taxes with the IRS as Single does not give you any more protection than filing Married Separate.

Why wouldn't you have asked for legal advice on this 25 years ago?

I think you should call the IRS and ask the same question each day for 5 days, then report back what all 5 responses are.

[hurricanegirl]

I will call IRS help line

I will talk to a CPA

But, in the meantme can anyone help me feel better by answering what is the worst scenario if I just correct asap!

[mwcpa]

maybe you do need to speak to an attorney about your past actions.....

I do suggest though that you read the small print above your signature on your tax return.... it starts with "under penalties of perjury..... " you know you were married, yet you chose to disregard the law and filed single..... do not walk, run to an attorney..... a one time mistake can be fixed.... 25 years of knowingly doing something wrong (again, you decided to mark that you were single and chose to not read the clearly written instructions).... the magic "f" word could come up here, and the "f" word is fraud (in tax it is defined by a percentage of tax understatement)....

[mwcpa]

"But, in the meantime can anyone help me feel better by answering what is the worst scenario if I just correct asap!"

Additional tax, penalties, interest....
If you get caught..... much, much worse......and in this day and age of big brother watching us.....

get a lawyer now.... your issues could be much worse given the lack of understanding evidenced here in your discussion of the tax law.... I sure hope you were not getting help from someone that you paid to come up with this result, if so, they did a really big disservice to you.

[TheOtherMe]

Great advice by mwcpa. K to you.

25 years of possibly fraudulent tax returns is no laughing matter.

[rangerj]

Heed MWCPA's advice and see a tax attorney ASAP. The elements of a crime are to knowingly, willingly, and intentionally commit the crime. Looking at this as an uninterested third party I can easily think that you and your husband knowingly, willingly, and intentionally filed false tax returns that resulted in harm to the government in the way of lower taxes. You also made false representations to the government, and false statements to its agents, in the officer in compromise process. Depending upon your states laws regarding spouses property rights you may also have made false representations regarding assets that could be used to pay the debt to the government. Filing false tax returns with the intent to evade taxes is a felony as is making false statement to a federal agent regarding a material matter. As there are two of you involved the crime of conspiracy can be brought up as well. Then there is the "civil. as opposed to criminal, fraud which are penalties as high as 75% of the tax understatement. As stated above doing the same thing over and over for many years is an indicator of intention and willfulness.. Knowledge is easy, as an element of the crime. Ask any juror and they would tell you who does not know whether or not they are married? Added note: where fraud is involved, civil or criminal, there is not a statute of limitations for assessment and collection of tax. There is a 6 year statute of limitations for criminal prosecution, IIRC.

[showtime]

Feb 1, 2012 22:45:41 GMT -5 @rockit said:

Why wouldn't you have asked for legal advice on this 25 years ago?

I'm always fascinated by these types of questions...

Exactly what is the poster hoping to get out of this? Or how does this help the situation?

No matter how Hurricane girl answers, it won't change the fact that she didn't ask for this advice 25 years ago.

So, is this question a "I told you so" type of question?
Why dwell on the past?

Whether Hurricane Girl should've would've could've, need to had to want to is irrelevant.

Ok, Sorry, I did not mean to jack this comment.
Therefore, to Hurricane girl, my suggestion is to seek out help from a tax attorney. Considering that you haven't been audited on this issue by the IRS means that it might not be that big of a deal (but, I'm not a Tax attorney, so by no means take my word for this)

Please let me know your outcome because I'm curious of the nature of marital status.

Best of luck

-Showtime

[TheOtherMe]

I respectfully disagree that what should have been happening for 25 years is irrelevant. No, the IRS won't go back that far. However, the correct taxes were not paid and that affected each and every taxpayer as her taxes would have been higher had she filed as MFS.

[rangerj]

The most disturbing thing about this post is the cavalier attitude toward tax fraud on the part of the general public as well as among so called tax professionals. Generally IRS will not go back more than 6 years, BUT if they can get the records they CAN go back to 1913 when fraud is involved, civil or criminal. It would be folly to assume what the government will or will not do. You assume the worst, seek the advice of a tax attorney and tell him, or her EVERYTHING. He/she cannot help you if there are things he/she does not know. Note that this is not intended to be an adverse response about the OP. The OP asked for a "worst case" scenario and advice based upon that. If this was a client the minute I thought fraud was involved I would stop the conversation and refer the matter to an attorney. Secondly I would ask the attorney to hire me so that the "privilege" would also cover me, that is the tax practitioner, EA, CPA, etc.. Food for thought.

[Deleted]

hurricaine, do not call the IRS - I was being facetious. I'm sorry that wasn't clear. You need an attorney to guide you through how to make this right with the correct damage control.

[TheOtherMe]

K to you ranger.

I would hazard a guess that the OP hasn't been back to this thread.

[hurricanegirl]

Actually, I have been back and read and re-read all comments.

Not trying to exonerate myself, but

First - this strategy was suggested to me by a CPA

Second - on face to face meeting with an IRS agemt (while working on the O.I.C.) We had a conversation which went something like this

IRS - I have a question, you dont have to answer

me - go ahead

IRS - arre you legally married?

me- yes

IRS - Why would you choose to pay MORE taxes by filing single?

me- because I am advised it is not illegal

IRS - I am going to recommend that they accept this O.I.C.

I honesly thought then that between my husbands' sole propriotership and his "Cash accrual" basis in filing, and all other circumstances that we were doing nothing wrong.

Please remember this was 30 years ago. Now with the internet and so much information at my fingertips I have learned and learned and learned and gotten worried

This was never an attempt to evade taxes. Both husband I and were high wage earners and have paid taxes dearly through the years (25%). Even the O.I.C. - husband paid 100% of what was owed, no penalties or fines was what we negotiated.