Howard's IRS and the Law Blog

Your name is signed on a joint tax return, but the signature is not yours.  Your spouse signed your name, but did you agree to it?

This becomes a problem if there are taxes owed on the return from your spouse, and the IRS starts coming after you for it.   That can be a big surprise if you were in the dark to the filing.

Whether you are ultimately responsible for the taxes depends on the facts and circumstances of your filing history with your spouse.

Procedurally, unauthorized signature cases are not handled under the IRS innocent spouse rules.  Rather, the goal is to convince the IRS to adjust the return filing status from joint to separate, and remove you from a return you did not agree to.

The IRS examination of your claim will focus on whether you authorized your spouse to sign your name on the return.  Authorization does not have to be direct, i.e., “Yes, you can sign my name.” Rather, it can be implied by your actions and whether your tacitly consented to the signing of your name and the filing.  This is known as the “tacit consent” rule.

The tacit consent rule can bind you to a joint return that you did not sign if you have a history of filing with your spouse and you did not file separate returns on your own.  Your signature is authorized by implication, that is, there is “tacit consent” to it by the history of consenting to joint returns in the past.

Here is a good example of tacit consent.  In the Tax Court case of Ashworth v. Commissioner, TC Memo 1990-423, Pamela Ashworth filed joint returns with her husband during their marriage from 1976 – 1981.  The 1982 return was also filed jointly, but was audited and a balance due was found.  Pamela claimed that she never signed the return and that the signature was not authorized by her.

The Tax Court found that that Pamela’s ongoing consent to the filing of joint returns (1976-1981) and her failure to file any separate returns created a pattern of consent to the joint filing in 1982.

In other words, it is not a forgery if tacit consent is found.

Bottom line:  The determination of a joint filing depends on the intentions of the parties, not the presence or absence of their signatures.

In these cases, the knee-jerk reaction of the IRS is to presume the intent of a husband and wife is to file jointly when that is what has always been done.  I have successfully defended joint filings for clients whose signatures were forged, but the best results comes with a history of separate filings.

You promised the IRS a monthly payment that your budget could no longer bear.  Or you tried so hard to repay your back taxes that you fall behind on this year’s return.  Your intentions are good, but this has caused your IRS installment agreement to default.  Where do you turn next?

First, it is important to know that the IRS must send you a notice of default before it can end your installment agreement and start collecting again.  This notice is titled “Notice of Intent to Levy!!! You Defaulted on Your Installment Agreement.”  If you are unsure if you have received this notice, take a look at it hereWith this notice comes very important rights.

After the IRS sends the notice of default, you have 30 days to file an appeal to renegotiate the installment agreement.  

Here is the important part:  If you file the appeal timely, the IRS cannot take any collection action or enforce the default until your appeal hearing is completed.   This is mandated by law  – Internal Revenue Code 6159(b)(5) - and by the Internal Revenue Manual (IRM 5.14.11.9).

Renegotiating installment agreements in IRS appeals protects your wages, bank accounts and assets from IRS collection action while a new plan of resolution is negotiated.   There, you can provide updated financial information – without any threat of levy – to solve the default.  You will also have the benefit of having one person being responsible for your case – an IRS appeals officer – rather than the chance of dealing with multiple personalities in the IRS Automated Collection Service.

If you are unable to repay your IRS debt, other options available to you include offer in compromise, bankruptcy or being placed in IRS uncollectible status.  If you owe under $25,000, the IRS has simple streamlined installment agreement process – learn more about that at my prior post here.

Defaulted installment agreements reflect the reality of our economy.  But you can keep the IRS at bay if you have defaulted and get your life back on track.

Here is a situation from a reader showing why location counts when it comes to Federal tax lien filings:  

The IRS has filed a tax lien against me where I live in Hamilton County, Ohio.  But I own real estate in North Carolina, and there are no tax liens filed against me there.  Does the IRS have to file a lien in the county where I live or where I own property for it be effective?

A federal tax lien is only effective against your property if it is filed in the proper place.  

If you own real estate, the IRS must file their Federal tax lien in the county where the real estate is located.  If the IRS files a lien in the correct county – where the rental property is located - that lien encumbers the property in a manner similar to your mortgage.  

Your place of residence is irrelevant to the effectiveness of a tax lien against real estate.

In your situation, the IRS filed their lien where you live, not where the real estate is located.  This means that if you have $50,000 of equity in the property, you can sell or refinance it without the direct interferenc of the lien.  The IRS is not secured on the property as the lien is filed in the wrong county.

The IRS may not know you have the property.  Depending on where you are in the collection process, it is possible they only know where you live.  That likely explains why the lien is filed in the wrong place.

I do recommend caution in how you use the property and any equity. 

The IRS may consider accessing and spending the equity to sources other than the government to be a case of dissipating assets.  A dissipated asset is one that has been sold, transferred or spent in a way that is detrimental to paying the IRS.  It depends on the facts and circumstances – for example, using the equity to pay reasonable living expenses is different than giving it to a friend to hold.  In an offer in compromise, the IRS can include dissipated equity - money you no longer have – in the settlement.     

The filing of a tax lien in the wrong county can be to your benefit.  But it is important to handle the situation properly so as not to give the IRS a claim of dissipating assets.

As a member of the Cincinnati Bar Association, it was exciting to see my article about solutions to today’s IRS collection problems as the cover story in March’s monthly bar journal.   

Here is a brief overview of the article - 5 Things You Should Know About the IRS:

(1)     The offer in compromise program is not as advertised on television.

(2)     IRS seizures of houses, personal belongings and business property are rare.

(3)     Retirement accounts are not protected from IRS collection actions.

(4)     The IRS has limits on the amount of time it has to collect a tax debt.

(5)     Bankruptcy is a powerful too that is capable of elminating taxes.  

These factors are essential to anyone with IRS problems – know the difference between what you hear and what is reality.  Feel free to reference the full article to learn more.  

With increased staffing of high-level Revenue Officers by 30% and levy actions hitting 15 year highs, the 5 Things You Should Know About the IRS can help you navigate a fresh start.

I received a call this week from a small businessman in Cincinnati who had an IRS Revenue Officer sitting in his living room.  Technically, he did not have to let the Revenue Officer in his house, but he did.  I am glad he called me. 

My client handled the situation correctly – professional, courteous and honest.  This was the Revenue Officer’s first impression – and when your head is in the mouth of the bear, it is important to say nice bear. 

A polite “I will get answers to your questions and help you do your job, but I would like to consult an atttorney first” is a good way to handle these uncomfortable situations.

When the Revenue Officer started asking financial questions – where do you bank? who owes you money? how much can you pay the IRS back every month? – my client stopped and called me.  The desire to please the Revenue Officer conflicted with an inner message of caution.

An IRS Revenue Officer needs your  financial information and is entitled to it.  And asking for it on the spot is the best way for them to get it without delay.  But disclosure on the spot – off the top of your head - can result in providing information that is both incorrect and harmful to your case.  Presenting your financial information in the best light possible is too important not to take time to think it through and do it right without pressure.

I knew the Revenue Officer in this case, and spoke to him on the phone while he was at my client’s house.  Later that day, I provided him a power of attorney authorizing my representation.  I requested and was granted 14 days to provide the financial information he was seeking. 

Incidentally, my client had a large account receivable at the time of the Revenue Officer’s visit.  The time permitted us to prepare an accurate financial statement, but also allowed my client to legitimately collect the receivable first and solve his discomfort with disclosing the source of payment.

Handle unannounced IRS visits with respect, but always keep in mind your rights to representation before disclosure.

I received a call today from an enrolled agent for my help with a client who was having problems not only with the IRS, but credit cards as well.  As usual, my enrolled agent friend got it right – bankruptcy was likely on the horizon for us to take care of both problems simultaneously.

Two basic rules on owing the IRS and credit cards:

The credit cards are usually firing blanks but make you believe they have a cannon

The IRS, on the other hand, has a cannon. 

Like many things in life, how the IRS and credit card companies appear to you bears little resemblance to their reality.

CREDIT CARDS

Every month, credit card companies send a statement for payment – along with all of the interest charges.  If you do not make the monthly payment, the dunning letters and telephone calls start.  Your account is sent out to a debt collector, and the phone rings.  Nerve-wracking. 

The immediate pressure credit card companies put on you for payment can result in them getting more attention than the IRS.  It should be the other way around.

Here is the important part to know:  The credit card companies have to file a lawsuit against you in court to be able to take your wages or bank accounts.   This not something that they do readily or even all the time.   

Remember this:  Until you hear from a lawyer who has filed a court action against you, you are under no risk of losing your wages or property from a credit card debt.  And most cases simply go the route of debt collectors without court action – attempting to collect by pressure.

COMPARE TO THE IRS

The IRS is usually less aggressive than credit cards at the outset.  The IRS will send you several collection notices after your tax return is filed, then stop.  After that, you may receive mail from them only once a year (an annual statement of your account).  

Unless you are on an installment agreement, the IRS does not stay in front of you with monthly statements like the credit cards.  And the IRS rarely makes outbound phone calls seeking payment.  But the IRS can be a sleeping giant.    

Those few collection notices the IRS sends you at the outset of your case can allow the IRS to immediately start levying on your wages and bank accounts.  No calls asking for payment, no monthly bills in the mail, no wondering about lawsuits like the credit cards  - just a simple letter - the Final Notice of Intent to Levy.  

After the IRS letter stream ends, you can get a wage or bank levy without any further notice. 

It may seem like the IRS is trailing behind the credit cards, but they are actually ahead of the game, and should be at the head of the line.  It can be deceiving.  And the stakes are high.

As I have written in prior posts, the IRS can be slowed down by appealing the Final Notice of Intent to Levy.  If you are interested in learing about the stream of IRS collection letters, see my post ”What do all of these IRS collection letters mean?”  For more on how bankruptcy can eliminate or reorganize IRS and credit card problems, read more here about Chapter 7 and Chapter 13.

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