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Columns: Tax Talk
George Saenz, CPA   Expert: George Saenz, CPA
Tax Talk
Spouse is entitled to his portion of tax refund
Tax Talk

Wife's student debt is costing husband
 

Dear Tax Talk,
My wife had a student loan, but the school went bankrupt before she could finish the course. She did not get her training and the school kept all tuitions. For the past 17 years when we've filed taxes, the state of Florida has been taking them. The federal government has dismissed the loan, but a company in Florida bought the loan and somehow they got approval to take my tax refund. Can they take my tax refund even if it was incurred before our marriage? How can I make them understand that the student loan has been charged off?
-- Fred

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Dear Fred,
IRS Tax Topic 203 discusses the Treasury Offset Program for past-due obligations. These include amounts owed for child support, federal agency debts and state income tax obligations.

The Treasury Department's Financial Management Service, or FMS, acts as a collection agency for the creditor that notified them of the past-due debt. FMS will send you a notice if an offset occurs. The notice identifies your original refund amount, your offset amount, the agency receiving the payment, and the address and telephone number of the agency. The IRS will not be informed of the agency receiving the offset, but FMS will notify IRS of the amount taken from your refund.

Since the debt is only your spouse's, you are entitled to your portion of the refund even though you are filing a joint return. According to Tax Topic 203:

If you filed a joint return and you're not responsible for the debt, but you are entitled to a portion of the refund because you reported income, payments, or credits on the return, you may request your portion of the refund by filing Form 8379, Injured Spouse Allocation. Attach Form 8379 to your original Form 1040 or file it by itself after you are notified of an offset. If you file a Form 8379 with your return, write "INJURED SPOUSE" at the top left corner of the Form 1040. Because the IRS will process your allocation request before an offset occurs, filing Form 8379 with your original return may take 11 to 14 weeks from the date of filing to process your return.

The IRS does not get into the validity of the debt. You should contact the agency shown on the notice of offset if you believe you do not owe the debt or you are disputing the amount taken from your refund.

Bankrate.com's corrections policy-- Posted: July 20, 2007
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