mcb39 Posted January 11, 2009 Report Share Posted January 11, 2009 :unsure: Client's husband has been incarcerated since April, charged with several felonies of which she had no knowledge. She immediately filed for divorce. He refuses to cooperate and is contesting divorce. I know that she qualifies for HOH with two minor children. She could itemize deductions as she has been paying all of the bills since arrest. His income stopped immediately. Other than distributions from his 401K, she has received no assistance other than her own wages. Is he responsible for taxes on 401K if she goes HOH or MFS? Also, keep in mind that WI is a community property state. Do we have a possibility here as he will not cooperate and divorce hearing does not come up again until Feb and may be postponed again. What would you do, KC, Jainen or anyone else? Quote Link to comment Share on other sites More sharing options...
jainen Posted January 11, 2009 Report Share Posted January 11, 2009 >>he will not cooperate<< I know that Wisconsin community property laws have some particular differences from my state of California, but I don't know what they are. In California, the community ends when the spouses separate permanently. In that sense, she must claim 1/2 his earnings up to April, and allocate 1/2 of hers to him for the same period. Afterwards, it's all her own wages. However, your client is still taking money from the 401(k), and I'm sure she will claim a community property interest for that in her divorce. So I think I would consider the community to continue, at least in financial terms. I suggest she file HoH and pay tax on half his 401(k), half his W-2, and half her own W-2. Send a copy of the worksheet along with the 1099 and W-2s c/o his public defender. Via her own attorney, of course. Quote Link to comment Share on other sites More sharing options...
mcb39 Posted January 11, 2009 Author Report Share Posted January 11, 2009 >>he will not cooperate<< I know that Wisconsin community property laws have some particular differences from my state of California, but I don't know what they are. In California, the community ends when the spouses separate permanently. In that sense, she must claim 1/2 his earnings up to April, and allocate 1/2 of hers to him for the same period. Afterwards, it's all her own wages. However, your client is still taking money from the 401(k), and I'm sure she will claim a community property interest for that in her divorce. So I think I would consider the community to continue, at least in financial terms. I suggest she file HoH and pay tax on half his 401(k), half his W-2, and half her own W-2. Send a copy of the worksheet along with the 1099 and W-2s c/o his public defender. Via her own attorney, of course. Thanks Jainen...that makes sense to me. Her attorney sees no reason why they shouldn't just file MFJ; but you know how some attorneys are about tax law. Also, I believe there was withholding on the 401K; but have no way of knowing the exact circumstances. I work with this woman and she is depending on me. Her husband always prepared their tax returns in the past and was secretive about them, as he was about other very serious things. I'm sure our CP laws are much the same as yours. Quote Link to comment Share on other sites More sharing options...
jainen Posted January 11, 2009 Report Share Posted January 11, 2009 >> Her attorney sees no reason why they shouldn't just file MFJ<< Neither do I, unless the spouse is so stubborn even his own attorney can't convince him that it's in his best interest to do so. **************** >>I believe there was withholding on the 401K; but have no way of knowing the exact circumstances>> On January 28 the retiree will get a 1099 in the mail, but since the envelope will be upside down your client will accidentally open it before she realizes it was addressed to him. At that point she will be confused and since it's obviously a tax form she will just give it to her tax preparer. **************** >>was secretive about them, as he was about other very serious things<< Apparently he was not secretive enough. Quote Link to comment Share on other sites More sharing options...
mcb39 Posted January 12, 2009 Author Report Share Posted January 12, 2009 >> Her attorney sees no reason why they shouldn't just file MFJ<< Neither do I, unless the spouse is so stubborn even his own attorney can't convince him that it's in his best interest to do so. **************** Neither do I, except that she is worried that he will not sign and she really needs the refund. He is the alleged criminal, but seems to have more rights than she has. >>I believe there was withholding on the 401K; but have no way of knowing the exact circumstances>> On January 28 the retiree will get a 1099 in the mail, but since the envelope will be upside down your client will accidentally open it before she realizes it was addressed to him. At that point she will be confused and since it's obviously a tax form she will just give it to her tax preparer. **************** He is not a retiree. Because he immediately got fired from his job after his arrest, the 401K had to be withdrawn to pay for attorney and other bills. All assets were immediately frozen for both of them. You are right about her being confused. She doesn't have a clue, but we are making her into a fast learner. >>was secretive about them, as he was about other very serious things<< Apparently he was not secretive enough. No, he wasn't. Both of their computers were seized in April. She just got them back last week, minus the hard drives. Apparently they were both loaded with hard core evidence which will be used to try to convict. She rarely used the computer, but her son and daughter need them now for homework. Wish me luck on this one.....See other replies under your statements in text above. I haven't figured out how to do that neat bracketing thingy. Quote Link to comment Share on other sites More sharing options...
RoyDaleOne Posted January 12, 2009 Report Share Posted January 12, 2009 Community property states are different. Does she have to claim half of the ill-gotten gains? Quote Link to comment Share on other sites More sharing options...
mcb39 Posted January 12, 2009 Author Report Share Posted January 12, 2009 Community property states are different. Does she have to claim half of the ill-gotten gains? There were no ill-gotten gains. If only it were that simple.......... Quote Link to comment Share on other sites More sharing options...
Lion EA Posted January 12, 2009 Report Share Posted January 12, 2009 He's still going to get a 1099-R for his 401(k) distribution, retiree or not. And, unless he's filed any change of address notices, it will probably wind up in HER mailbox. Jainen gave you a likely scenario if that happens. Quote Link to comment Share on other sites More sharing options...
mcb39 Posted January 12, 2009 Author Report Share Posted January 12, 2009 He's still going to get a 1099-R for his 401(k) distribution, retiree or not. And, unless he's filed any change of address notices, it will probably wind up in HER mailbox. Jainen gave you a likely scenario if that happens. Yes, of course, I know that. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted January 12, 2009 Report Share Posted January 12, 2009 I'd be inclined to file HOH rather than to file with him, especially if he is refusing to cooperate. Check with her attorney about the Community Property laws, but do some research yourself, because most divorce attorneys know ZIP about tax law, in my experience. Her's might be the exception, but don't assume he knows beans about taxes, Marilyn. The reason I say HOH is that this is about more than the lowest tax bill, it is also about separating her from his tax file. Sometimes it is better to pay a bit more and not get caught up in things of his that come out later. She did not know about the porn, she might not know about some unreported income, too..........like if he sold as well as bought that crap. Quote Link to comment Share on other sites More sharing options...
mcb39 Posted January 13, 2009 Author Report Share Posted January 13, 2009 I'd be inclined to file HOH rather than to file with him, especially if he is refusing to cooperate. Check with her attorney about the Community Property laws, but do some research yourself, because most divorce attorneys know ZIP about tax law, in my experience. Her's might be the exception, but don't assume he knows beans about taxes, Marilyn. The reason I say HOH is that this is about more than the lowest tax bill, it is also about separating her from his tax file. Sometimes it is better to pay a bit more and not get caught up in things of his that come out later. She did not know about the porn, she might not know about some unreported income, too..........like if he sold as well as bought that crap. Thanks for your input KC. I have been leaning toward HOH all along simply because I don't want her filing with him. I tried to get her attorney to push for the divorce before year end. He couldn't see what the big deal was. So, of course, you are correct about their knowledge of tax law. See it time and time again. This is not just about porn..it is the worst of the worst. In the meantime, he is innocent until he gets his taxpayer financed jury trial and she sits in limbo and tries to hold her family together. So far he has refused to sign anything so how long can he delay her refund by refusing to sign a Joint Income Tax Return. I just don't want to mess up on Community Property Law........ Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted January 13, 2009 Report Share Posted January 13, 2009 Well, if he refuses to sign a MFJ return, he can delay her for as long as she insists on filing that way, because no one can be compelled to file jointly. And since she has the HOH option, why would she want to wait? Quote Link to comment Share on other sites More sharing options...
barosser Posted January 14, 2009 Report Share Posted January 14, 2009 Might contact David Mellem concerning WI CP laws. (lives in WI) He has helped me in the past with different problems. [email protected] Quote Link to comment Share on other sites More sharing options...
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