Suppose a couple who are separated and living apart have submitted a joint Offer in Compromise on an income tax liability owed on a previously filed joint return year. Now, they are in the process of getting a divorce. The husband had prepared the Offer but claims not to have a copy of the financial information submitted. Can the Wife obtain directly from IRS via a Freedom of Information Request a copy of the information submitted by her soon to be ex-husband?
Chief Counsel Advice Number 201404010 provided to the IRS Centralized Offer in Compromise unit advised that the information could not be disclosed citing Internal Revenue Code Section 6103(e)(8) which governs the disclosure of tax return information.
That section provides:
(8) Disclosure of collection activities with respect to joint return
If any deficiency of tax with respect to a joint return is assessed and the individuals filing such return are no longer married or no longer reside in the same household, upon request in writing by either of such individuals, the Secretary shall disclose in writing to the individual making the request whether the Secretary has attempted to collect such deficiency from such other individual, the general nature of such collection activities, and the amount collected. The preceding sentence shall not apply to any deficiency which may not be collected by reason of section 6502 (dealing with statute of limitations on collection of tax debts).
Thus, IRS, upon written request, IRS will disclose only:
- Whether IRS has attempted to collect the deficiency from the other former or separated spouse.
- The amount, if any, collected from the former or separated spouse.
- The current collection status such as a “taxpayer delinquent account TDA),” or “installment agreement in effect or suspended.”
- If suspended, the reason for the suspension of the installment payment agreement such as being unable to locate the taxpayer or for financial hardship.
Section 6103, however, does not authorize disclosure of personal information about a former or separated spouse including information about the other spouse’s:
- Income, or.
- The other spouse would certainly like to know about the employment, income and assets disclosed to IRS with the Offer in Compromise. Both Form 656, Offer in Compromise, and Form 433-A (OIC) Collection Information Statement for Wage Earner and Self-Employed Individuals are signed under express penalties of perjury. Form 433-A could be compared with the Financial Affidavit filed by the other spouse in the divorce proceeding.
- The obvious caveat here is not to allow a joint offer to be submitted without carefully reviewing the offer and receiving a copy of the offer and all supporting information.
- Failing that, discovery of such information might be obtained from the other spouse’s tax return preparer or attorney if a return preparer or attorney assisted with the preparation of the offer. Since the offer is joint, absent disclosure that only one spouse was being represented, the preparer or attorney would be representing both spouses and would be required to provide to each original documents relating to the offer.
- Such joint representation, however, presents conflict of interest issues for the preparer or attorney that could result in malpractice claims, especially if the offer was submitted after the parties separated or initiated divorce proceedings. For, submission of the offer tolls, during the offer’s pendency, the running of the statute of limitations on collection of tax debts and the waiting period before a bankruptcy filing during which tax debts are not dischargeable.
© 2014 by Robert S. Steinberg, Esquire
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