Dump Tax Debt

Today TaxMama hears from Bill in Nevada who tells us. “I have a tax lien from year 2000. This was a debt that was awarded to my ex in our divorce. At the time of divorce the debt was around $500. She got it down to less than $200. and stopped paying on it. It is currently around $2,700. Can I file a tax bankruptcy or in anyway get this off of my credit rating?”

Dear Bill,

The fact is, just because your divorce agreement assigns a tax debt to your wife – it doesn’t bind IRS to that agreement, does it? Did you remember to ask IRS to sign your divorce agreement, too? Nope! As you’ve learned, to your chagrin – you’re still responsible for the unpaid balance.

And you’re angry. You don’t want to pay her debt. So do you think filing bankruptcy is going to punish HER?

Sure, you can file a tax bankruptcy to get rid of the debt. It’s certainly old enough.

You want to dump the monumental sum of $2,700 worth of taxes due via bankruptcy? Terrific. Let’s see, the bankruptcy will cost you over $3,000. So, that makes perfect sense to me.

Let’s see, you want to get this debt off your credit – so that tells me you care about your credit rating. How do you think a bankruptcy is going to affect your FICO score?

At this point, Bill, you have three choices – I mean, 3 sensible choices:
1) Either pay the debt and forget it.
2) Hold off for two more years and it will expire all by itself. Just be sure not to have any refunds in the meantime, or IRS will grab them.
3) Find you ex’s assets or current job and contact IRS – insist they collect the money from her. Raise enough of a stink – and put it into writing, and IRS will be compelled to go after her funds – or to explain why they didn’t.

And remember, you can find answers to all kinds of questions about divorce and tax debt and other tax issues, free. Where? Where else? At TaxMama.com

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