Messy Divorce & Business Taxes

[Deleted]

DD was in process of divorce in 2011, so by agreement of the attorneys and court, the joint tax filing was to be held until the rulings were complete (a refund was expected). Unfortunately the husband filed anyhow and PIN signed for DD although she never saw the return. He had the money deposited to their allegedly closed joint bank account (he told the court it was closed), pulled the money and closed the account that day.

In the end the court ordered the husband to correct the tax filing & to be responsible for any costs/fees/penalties associated with the corrections. It needs corrected because he could not have correctly included her business income/expenses because he did not have the records.

We know that he will not actually do the correction, despite the court order, so we called the IRS to get a copy of the tax return in order to see what he filed for her business. Because she did not sign the tax form and the IRS considers it a fraudulent filing by him, they will not give her a copy. They are telling her she just needs to file a Married/Separate tax form for herself for 2010 and they don't care what the court ordered.

So, what do we do here? What kind of professional assistance is appropriate? Her business did make a profit in 2010, which we are guessing the husband did not report, so he took too big of a return. This is probably another situation where we just need to suck it up & I loan her the money to pay whatever taxes are due on a married separate filing. I just want to make sure that we are getting right advice since court & IRS directed two different things.

[mwcpa]

"So, what do we do here?"
preparing and filing a married filing separate is the first thing to do... but, did she live apart from or with her ex during the last six month of 2010, does she have children that live with her.... my answer may change with more facts here..

then
file a report with the police (even though they won't do anything, reporting this gets it on the record.... but check with her attorney first before this is done)
file a report with the IRS ..... they will go after him if the $$ are big enough.... they will send a nasty gram anyway..... (http://www.irs.gov/newsroom/article/0,,id=176632,00.html).... follow the rules and you may get a reward for such....
notify her attorney that the husband signed her name to a document that noted "under penalties of perjury"

[Deleted]

In 2010 she lived with him for 9 months and he moved out when she filed for divorce, but they were not legally separated or divorced at the end of the year (the court does not move that fast here). They have children. The divorce was finalized late 2011 and she is sole custodial parent and awarded the tax exemptions from there on out.

The attorney and court documented the issue surrounding the filing clearly, so I think that part is covered (at least the part where it was done in 'bad faith' - the court does not name it 'fraud' but does direct him to amend the filing to correctly include her information and be responsible financially for that activity also).

He defied the court order to produce the tax forms that he filed, so she hasn't seen them, but from the amount of the refund she thinks he used the same figures as the 2009 return, claiming married joint with kids and her on the form.

Our understanding is for 2010 they could file as married- joint or separate only, but the court would have ordered joint because there is a larger benefit to the family that way. It would have been fine to file jointly so long as her accurate business figures were used, but now there is this big unknown exposure. He just wanted the refund so he did several fraudulent things to achieve getting it.

ETA: Income is not high enough to qualify for rewards etc & they will never collect on it. We are dealing with a total loser/con/drug addict here. I haven't run her married/separate numbers for 2010, but it won't be pretty since she can't get the benefits of having kids on that return + will have to pay all the self employment taxes that should have offset the return $s he took.

[mwcpa]

since they lived in the same home for nine months her only option at this time is to file as married filing separate..... if the children lived with her after she left then she should be able to claim the children as her dependents (tie breaker rules).... the IRS will send an inquiry out after this is filed.... she needs to do the right thing and then speak to her attorney.... what the court said and what the tax law requires sometimes are in conflict.... she needs to meet her responsibilities related to her tax filings first, then address his disregard of the judges order, it's been my experience that judges do not take kindly to those who violate their orders....

[Deleted]

The judge was very unhappy with him all through the proceeding as he violated numerous orders, failed to pay reparations, lied to the judge, had temper tantrums in court, threatened the attorney and GAL (in court, on record) & then disappeared and didn't show up at hearings or anything anymore. So basically the divorce was completed by bench trial.

I will read up on the tie breaker rules and see if she qualifies. If she can file with the kids then that would seem fairer, but I'm not sure how that plays with the court since their direction was for the husband to fix/correct the return he filed. Maybe that part doesn't matter. Mostly what I am concerned about is that she is square with the IRS.

Thank you for the pointers mwcpa!!

[mwcpa]

you are welcome.....

my brother just went through a long drawn out messy divorce.... his ex would show up to court intoxicated or she would be late..... at the end of the day, he got sole custody of his son, which was the only reason I think he stuck around with his nut job as long as he did.....