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Everyday Cheapskate: Divorce decree statement means nothing to the IRS

Dear Mary: I am recently married and my husband owes the IRS $23,000 in back taxes for tax year 2010. He agreed to an installment plan of $320 per month with the IRS.

Their divorce decree states that each is responsible for paying half of the any taxes owed, but she says she cannot pay anything. He has been paying $400 per month, trying to pay his half off faster, but it’s hard on our finances and the interest continues to accrue each month.

Is it possible for an accountant or tax attorney to deal with the IRS to get the total amount owed reduced? — Rhonda

Dear Rhonda: Here’s what you need to know about divorce decrees: Creditors and the IRS are not bound by them. In fact, they could not care less about what the divorce judge decreed.

The IRS is going to hold your husband responsible for 100 percent of the taxes owed for 2010 and 2011. And the IRS will hold the ex-wife 100 percent responsible as well. They don’t care which of them actually pays as long as the taxes get paid. And if it goes to collection and they start filing liens, the last thing the IRS will be concerned about is a divorce decree!

If the ex-wife doesn’t abide by the decree, the divorce judge will deal with her, not the IRS or other creditors. If your husband pays the taxes in their entirety, he can go after his ex for half based upon the terms of the decree and probably get the court to help him. My advice is for your husband to stop trusting the ex to do anything, let alone pay taxes for which he is legally obligated. The IRS is the last entity he or anyone on earth wants to owe.

That being said, there is a way to get an amount owed reduced, and that is through a process known as an “offer in compromise.” You will need to get a tax attorney or CPA who is an “enrolled agent” with the IRS to craft an offer to the IRS. If they accept it, your husband must be prepared to write a check for the full amount agreed upon. Since he has been making payments faithfully, his offer is likely to be received positively.

Dear Mary: What is the right thing to do when you honestly cannot afford to put your kids in sports, such as Little League baseball, but you know it is such a good thing for them both physically and socially? — Bonnie

Dear Bonnie: The right thing is to live within your means and not go into debt. If this is a high priority as you look at your total financial pictures, decide what you will sacrifice to free up the money for childhood enrichment activities. Then consider all reasonable alternatives. Does your Parks and Recreation Dept. offer organized sports? What about the YMCA or a local church?

If your kids really want to play, get them into a serious savings program now so they can help pay the fees next season.

Mary invites questions at mary@everydaycheap skate.com, or c/o Everyday Cheapskate, P.O. Box 2099, Cypress, CA 90630.

This column will answer questions of general interest, but letters cannot be answered individually

Mary Hunt is founder of www.DebtProofLiving.com, a personal finance member website.

To find out more about Mary and read her past columns, please visit the Creators Syndicate Web page at www.creators.com.

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