My Ex Is In Jail and Now The IRS Is After My House

8 min

•May 6, 202628 days ago

Summary

A caller named Sarah seeks advice on handling a $7,900 IRS tax debt from 2018 when she was married to her ex-spouse, who is now incarcerated for embezzlement. The host advises her to explore the IRS innocent spouse provision before paying and emphasizes prioritizing IRS debt at the top of any debt repayment plan.

Insights

The IRS innocent spouse provision can provide relief for taxpayers who signed joint returns without knowledge of tax non-compliance by their spouse
IRS debt should be treated as a priority exception to standard debt payoff strategies due to unlimited enforcement power and compounding penalties
Divorced individuals may inherit tax liabilities from former spouses if divorce settlements are not properly enforced, especially if the ex-spouse becomes unable to pay
Consulting with endorsed tax professionals before making IRS payment decisions can potentially save thousands of dollars through available legal provisions
Life circumstances like spousal incarceration can trigger unexpected financial obligations that require strategic prioritization and professional guidance

Trends

Increasing awareness of innocent spouse provisions as a tax relief strategy for individuals in complicated marital situationsGrowing need for tax planning and divorce settlement enforcement to prevent liability transfer between former spousesRising emphasis on professional tax consultation before making IRS payment decisions rather than self-directed payment plansDebt prioritization strategies evolving to treat IRS debt as a critical exception requiring immediate attentionFinancial planning challenges emerging from criminal justice system impacts on family finances and debt obligations

Topics

IRS innocent spouse provision and eligibility requirementsTax debt from joint returns filed during marriageDebt snowball methodology and exceptions for IRS debtDivorce settlement enforcement and tax liability allocationIRS liens and notice proceduresTax debt payment strategies and credit union financingPenalties and interest accumulation on unpaid taxesPersonal financial management with multiple dependentsBudgeting and debt repayment planningTax professional consultation and selection

Companies

Ramsey Solutions

Host recommends contacting Ramsey Trusted tax professionals endorsed by Ramsey Solutions to evaluate innocent spouse ...

People

Sarah

Caller seeking advice on $7,900 IRS tax debt from 2018 joint return with incarcerated ex-spouse

Dave Ramsey

Provides financial advice on IRS debt, innocent spouse provision, and debt prioritization strategy

Quotes

"You do not want these people in your life. They have unlimited power, no brains, and they charge all kinds of penalties and interest minute by minute by minute as you go along."

Dave Ramsey•Mid-episode

"It's not just about how much you make. It's about having a plan for what you've got."

Dave Ramsey•During EveryDollar ad segment

"We always say if there is IRS debt, it gets moved to the very front."

Dave Ramsey•Late episode

"I'm like 80, 90% sure you're getting out of this."

Dave Ramsey•Mid-episode

Full Transcript

Brought to you by the EveryDollar app. Start budgeting for free today. Well, I had a recent notice received from the IRS for tax debt from a year when I was married to my former spouse. I was unaware of this tax debt because I thought it had been addressed. And I run a really tight budget and I have my debt snowball very planned. and I'm wondering if I pivot from that to take care of this tax debt because it had that notice of lien. There has not been a lien yet. How much is it? It's $7,900. What do you make? I make $132. Okay. And what year is this from? 2018. Okay. And you were obviously married then. Mm-hmm. And you filed married filing jointly? That year, yes. Okay. And you were not aware that the taxes were not paid? How much money do you have to make where budgeting is just optional? If you chose C, watch this. She makes about $170. I make about $115. Hold on. Did you go back after you paid off everything, borrow some more money? Oh, yeah. Oh, no, Carlos. I like to go here and there and get to Mercedes. Oh, no. We went full South Beach. It's not just about how much you make. It's about having a plan for what you've got. So start budgeting with every dollar for free today. You were not aware that the taxes were not paid? That correct We had settled in 2020 and the equitable distribution required that he pay that and now he incarcerated So I think that his payment plan has ceased and they coming after me for it Okay. I'm not positive if this will work, but before you decide to pay it, I want you to get in touch with one of our tax professionals at RamseySolutions.com that we endorse, the Ramsey Trusted. And I want you to ask, and I want you to tell them every detail of the situation and see if you qualify for a thing called the innocent spouse. Okay? Okay. So an example would be, and this sounds like it qualifies, but I'm not, you know, without getting into every stinking detail, I'm not positive. And even if we did, I'm not sure I would know. But the innocent spouse provision of the IRS code sounds like this. A good example would be me. Okay? My wife is a full-time mom. I have a business and we do married filing jointly. The number of minutes or hours she spends looking at our tax return is precisely three and a half seconds. Okay. So she signs it and assumes that me and the tax people that we're using know what the flip we're doing. Right. And then later on, a tax bill comes up, and then she gets some notice in the mail like you did. Okay? Well, obviously, she didn't have anything to do with it. And so she could file under the innocent spouse provision and say, yeah, we filed married filing jointly. Yes I did sign the return but I have no working knowledge of that stupid business or that stupid man Okay And so I innocent of this tax bill and they will take it off of you and send it to him And of course he incarcerated so they not going to get paid, but that doesn't matter. What matters is, is it comes off of you. I think you're going to qualify for that. Okay. Based on what you told me, you see what I'm, you see why, because this is a thing, a, he was supposed to take care of it and B it was a long, well, long ago, but, But the circumstances were that you had no knowledge that the bills were not being taken care of properly and you signed the return. Correct. And that's why I'm thinking you're going to qualify for this innocent spouse provision, which is an $8,000 switch in this conversation. So that's the first thing I want you to do because I'm like 80, 90% sure you're getting out of this. Okay. Now, if you don't, let's go back to your question if I'm wrong. Okay. then what do we do with the 7900? We put it at the top of the list and we pay it off as soon as you can. Okay, now my debt snowball. It goes to the top of the debt snowball. Okay. And you knock it out as fast as you possibly can, or you go borrow $8,000 from the credit union and pay it off and then put that in the debt snowball. I don't care which. But you get rid of the IRS. You do not want these people in your life. They have unlimited power, no brains, and they charge all kinds of penalties and interest minute by minute by minute as you go along. Yeah, it's the one exception of the debt snowball, Sarah. We always say if there is IRS debt, it gets moved to the very front. Okay. Okay. That was my question. Or I would refinance it on a credit card or down at the credit union, one of the two. Okay Get it cleared off But don put it on an IRS payment plan unless you have no other options And then put it at the top of your debt snowball Okay I'm sure hope I'm right about the other thing, though, don't you? I certainly do. I didn't know that existed. I do feel it was definitely out of left field because I've been doing quite well on my own with four kids. But that kind of threw me for a loop. Oh, that's so frustrating, Sarah. I'm sorry. So you make $130,000 a year doing what? I am a regional asset manager. What is he in jail for? Embezzlement. No way. That makes the story even better about you being an innocent spouse. It sure does. The embezzlement boy is in jail. I mean, wow. That's got like drama on it. That's so, I'm so sorry y'all been through that. And he's the father of your four kids? yes sir i'm so sorry how old are you um i'm 41 man you've been through some hell but you are strong you are strong and you are smart i'm proud of you thank you doing the best i know how to do to take care of these kids and and god is good and so we're just trying to make sure i honor him with the next right decision you are but you've been very very wise and very very uh wow that's hard. That's amazing. Amazing. Yeah. Yeah. Go, go to our folk and they'll help you. I think I'm pretty sure that's going to work. Ooh. Hey, you know, sometimes it's free advice around here is valuable. Could save her 8,000 bucks. There you go. Glad she called in. Yeah. So then all the good vibes your way, Sarah. Create your free every dollar budget today. The simplest way to budget for your life.