Your Life

Your Life

Major life milestones often have a major tax impact. Changes in your marital status, having a baby or adopting a child can have significant impact on your taxes. This is the place to ask questions about dependents, real estate, and other various scenarios that play a significant role in what taxes you pay.

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Pioneer
Posts: 1
Registered: ‎04-06-2017

Help- injured spouse or innocent spouse?

Me and my husband just got married last year. I've been in the process of having my student loan debts, all the way back from 2009, forgiven. They still say they're "reviewing" it. I was unaware they placed an offset on my tax returns. Me and my husband filed jointly (Big mistake!!!), they took all $5290. Sadly, I almost initially, filed separately which was going to be $900 back to me. That means 4390 of it was all his! Well, in order to file injured spouse, it claims: 

  1. Innocent Spouse Relief provides you relief from additional tax you owe if your spouse or former spouse failed to report income, reported income improperly or claimed improper deductions or credits.

He doesn't qualify for that. Then he tried filling out the Injured spouse claim. It states on the form: 

 

9 Did (or will) you claim a refundable tax credit? (see instructions)

Yes. Go to Part II and complete the rest of this form.

No. Stop here. Do not file this form. You are not an injured spouse

 

Refundable tax credit: 

Line 9. Refundable credits include the following: Making work pay credit (2009 and 2010),

Government retiree credit (2009),

American opportunity credit (2009 and later years),

First-time homebuyer credit from Form 5405 (2008–2011),

Credit for federal tax paid on fuels,

Adoption credit (2010 and 2011),

Refundable prior year minimum tax,

Health coverage tax credit, and Premium tax credit (2014 and later years).

 

He doesn't qualify for this either.

 

Is there no hope to get his portion back???

 

Tax Pro
Posts: 5,725
Registered: ‎02-23-2016

Re: Help- injured spouse or innocent spouse?

Hi BenNicole51,

 

Welcome to the H&R Block community.

 

The innocent spouse form is not necessary.  That is for a situation in which you expect that your spouse will owe a current tax debt that you are not liable for.

 

When you have a past debt you should ALWAYS fill out Form 8379 (Injured Spouse Allocation).  This will save your spouse's part of the refund.  Pay no attention to what you saw when you tried to fill out the form as it is incorrect.  You allocate more than just tax credits when filling out Form 8379, and the form also shows that IRS that your spouse is not liable for the debt.

 

When filling out the injured spouse allocation all of your husband's tax benefits, including his exemption, 1/2 of the standard deduction, your dependents' exemptions, and all deductions & credits that your husband would have claimed if filing separately should be allocated to him.  Your own exemption, 1/2 of the standard deduction and benefits for which only you would qualify if filing separately should be allocated to you.

 

The tax benefit that I'm most often asked about when it comes to a situation like this is the earned income credit, and that's because the EIC often makes up the majority of the refund when you have dependents and you qualify for it.  The IRS allocates the EIC between the two of you based on income (you cannot allocate the EIC yourselves).  If your spouse has the larger income he will get most of it, especially if his income is significantly larger.  If you have the larger income then most of the EIC will go toward your loans.  If you were to file separately you would not get any earned income credit or dependent care credit at all as both credits are disallowed when your filing status is MFS.

 

There is an easy way to get the IRS to stop seizing your refund every year.  Call your student loan servicing company and set up a payment plan, even if it's a $0 per month income-based plan, and then make sure that you make at least 10 consecutive on-time payments.  Once you've made the 10th payment your loans will come out of default and you'll see your tax refund again.  Depending on your situation and what your loan servicer is willing to do you may be able to bring your loans back into good standing with as few as 3 consecutive on-time payments, but it's usually 10.

 

If you have any other questions I'll be glad to help.

 

Louis,
Senior Tax Advisor (Tampa, FL)