JK Harris and Company, Creating Lifetime Clients

Recently, the U.S. Tax Court heard the case of a widow whose husband had passed away and left her with deep financial problems she was unaware of during their marriage. At the time of his death, she found out he had not been paying their joint Federal income taxes or Federal employment taxes for his employees and they owed the IRS over $131,000.

At the time of the trial, the widow was 70 years old and had been unable to work for decades due to a disability. Her husband had always taken care of their financial issues and had all financial statements sent to his law practice, leaving her unaware of their worsening financial condition. He had prepared all of their tax returns and presented them to her to sign just before they had to be mailed off to meet the filing deadline each year.

The widow liquidated what assets she had and attempted to pay off the tax debt. She applied to the IRS for innocent spouse relief and was denied. When she took her case before the Tax Court, they reversed the IRS’ determination, supporting the position she knew nothing about the tax debt and therefore was not in a position to have paid it. She was already experiencing financial hardship and she in no way benefited from the taxes not being paid.

Unfortunately, this is a situation we have seen many times over the years, whether the spouse dies or the couple divorces. One spouse is left culpable for the other person’s errors or evasion. Situations like this are what innocent spouse relief was designed for.

One of our case specialists recently helped a client who had been through a divorce and faced joint tax debt, which she was unable to pay. The IRS was trying to hold our client jointly responsible for her ex-husband’s tax debt, which came from his law practice. She signed a joint return with her ex-husband and believed he would file the taxes accordingly. Her taxes were withdrawn correctly through her own employer and she felt she was wrongly charged with owing tax debt attributable to his business. Although the IRS denied our client’s initial request seeking injured spouse relief, we persevered and the IRS granted her equitable relief status.

Check the IRS.gov website to see if you qualify for innocent spouse relief using the innocent spouse tax relief eligibility explorer.

Wouldn’t it be nice if you could purchase a brand spanking new car and be able to deduct it from your taxes? Well, now you can…sort of.

The IRS recently made the announcement that taxpayers who purchase a new vehicle (car, light truck, motor home or motorcycle) will be able to deduct state and local sales and excise taxes paid on the purchase on their 2009 tax returns.

Of course there are certain stipulations which must be followed. The deduction is limited to taxes paid on purchases up to $49,500. That’s not to say you can’t purchase a vehicle that costs more than $49,500, but you will only get the deduction on the taxes up to that purchase price.

The vehicle must be purchased after Feb. 16, 2009 but before Jan. 1, 2010. Also, the deduction is phased out for taxpayers who have a modified adjusted gross income between $125,000 and $135,000 and file single and between $250,000 and $260,000 and file jointly.

Now here’s the really great thing. You don’t have to itemize on your tax return to receive this special deduction. It is available even if you use the standard deduction. And unlike the First-time Homebuyers Credit, the deduction cannot be used on your 2008 tax returns, only 2009.

Kind of makes you want to go out and look at some new cars, doesn’t it?