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Injured Spouse Relief
“It feels like a sucker punch to the gut.” I was on the phone with a client who was a newlywed and filing with their new spouse for the first time. They kept their paycheck withholding as single. So, they were anticipating a larger than usual tax refund. Like a lot of taxpayers, they spent their refund before they even received it. Each day, they were checking “Where is My Refund ?” and even their IRS account. Then, it happened. Code 898: Refund applied to non-IRS debt . It looked as if they wouldn’t receive that refund they already spent. Now, my client did not know what to do. Before getting married, my client’s spouse told them, “I never get a tax refund.” But they failed to mention why they never got a refund. Honestly, they did not know what their refund was paying for. We later found out that each year the Treasury Department garnished the refund for back child support. My client knew their spouse had child support but did not know they were behind on it. If you have a client in this situation, all hope is not gone. I could help my client find out what offset the tax refund. We could also get a portion of the refund back. You can do the same thing for your client. That is assuming that one spouse is not liable for the debt that offset the tax refund. The IRS calls this injured spouse relief. I’ll walk you through how you can help your client with their refund garnishment sucker punch. Yes, you can help them get their part of the refund back. Let’s start with what injured spouse relief is. Then we’ll look at who qualifies as an injured spouse and how to request injured spouse relief.
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CURRENT EDITION
When Your Client’s World Is Bigger Than the U.S.
A lot of client meetings still start with the same assumptions: W-2 in a U.S. state, mortgage nearby, a 401(k), maybe some RSUs, and a college-savings plan. Yet many of those “simple” clients now own an apartment in another country, freelance for a foreign company, or have parents wiring money from overseas. The tax code does not see those details as background color; it treats them as organizing facts. This is where citizenship, residency, and domicile quietly step onto center stage. For planners, the challenge is not memorizing every cross-border rule. It is knowing when a client is no longer “just domestic” and shifting your planning framework before you stumble into penalties, double taxation, or blown opportunities.
Are You Committing Filing Status Malpractice?
Consider this article your periodic reminder that, for married taxpayers, filing jointly is an election and not the default (and certainly not the only) filing status option. It is important in a busy practice to remember to offer this option to clients who may benefit from filing separately, even if they don’t ask.
Syndicated Easements: Fresh IRS Offer and the Perils of Post-BBA Gamesmanship
The IRS has issued a statement about a new settlement offer that is going out for conservation and historic preservation easement disputes. It is similar to previous offers, but there is one big difference. The partnership will not have to make a payment at the time that it accepts the offer. Other than that, it is similar to the deal offered in 2020. Taxpayers get to deduct what they are out-of-pocket as an ordinary deduction and are subject to a 10% penalty. In general, the out-of-pocket donation might be around 20% to 25% of the claimed charitable deduction. The Tax Court, on average, has been allowing 6%, although results vary. There is usually a 40% penalty in the decided cases.
SIMPLIFIED TAX STRATEGIES &
PRACTICAL IMPLEMENTATION
Think Outside the Tax Box provides tax reduction strategies along with practical
implementation advice in order to reduce your clients’ federal tax bill with ease.
