Offers-in-Compromise – non liable spouse

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    Steven Buonomo

    Hello everyone,
    I have a client who has no assets and no banking account (afraid of a levy). He currently makes $45k / year from a 1099 and has not paid as taxes since 2014. He is current on his filings.

    He claims he gives all of his income to his non-liable spouse to pay for household expenses, medical insurance, mortgage, his vehicle etc. His non liable spouse is the only person on the title of the house. He has a negative RCP after considering his portion of total family income and allowable expenses.

    I want to submit an offer but how do I prove that he gives his income to his non liable spouse? There are no cancelled checks or documentation? Would an affidavit from the taxpayer and the non liable spouse be acceptable? any other sugestions?


    Brian Barto

    1. I will assume you are in a NOT community property state.
    2. Although the Non-debtor spouse will NOT be required to disclose her assets, she WILL be required to disclose her income. Does she have any income? The non-debtor spouse’s income is required in order for the IRS to do an allocation of joint expenses between the two spouses.
    3. The liable spouse would take his % of the total household income, and be allowed to then deduct his % of the “Joint household expenses” – If his income accounts for 80% of the total household income, he would be able to take 80% of household expenses for the items such as Food/clothing and Housing/utilities. I would think you can simply submit the bills that were paid by the non-liable spouse as proof of household expenses with an explanation. I don’t think it makes difference that he “gives” the money to his spouse. You would just need to show that the money is actually going towards household expenses.
    4. For certain items such as automobile, he could take the expense for just his vehicle, and the expense for his % of the health insurance (if they are both covered on the policy)
    5. You mention he is “current on his filings” – All tax returns filed through 2019? AND Estimated taxes paid for 2020? The estimated taxes will be important for compliance.

    Eric Green

    Steven, he has to open a bank account and deposit his earnings in and then cut checks for the expenses. The way it is now they would refuse to allow him the expenses. I understand he is concerned about levys so I would have him set up the account, call ACS and request a 45 day hold and get started. You can always file the OIC with one statement and later they will request more when it gets worked.

    Steven Buonomo

    Thank you for the feedback ans suggestions.

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