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Joint return for divorced couple

A couple I know were recently divorced, but since they were still married on

12/31/2023, their settlement agreement requires them to file a joint tax return for 2023 and to split any refund or costs 50-50. I just did a run-through on their taxes, and it turns out they will owe around $7000 together, which means each of them will owe $3500 according to their commitment in the divorce agreement. It appears that one or perhaps both of them will have trouble coming up with these amounts by April 15th. What options do they have in the following scenarios?

Scenario 1: One party can pay the $3500 but the other cannot. Will the IRS accept a partial payment of the $3500 from the person who can pay and then set up a payment plan with the other party for the remaining amount? If the second party defaults, can the IRS come after the party was able to pay their half? Remember, that person fulfilled their obligation under their divorce agreement.

Scenario 2: If neither party can pay the full amount, can they each negotiate a separate payment plan with the IRS or do they have to work together on this and have the same terms?

Three other questions:

1) What are the general options available when someone can't pay their taxes on time? The IRS website references a 180-day payment plan and then some kind of longer term plan, but it doesn't state what term or terms are available.

2) How does IRS determine the interest and penalties that are owed under these plans?

3) If the parties determine that they can't pay the total by April 15th and have to go on a payment plan, is there any value at all in getting a filing extension to October 15th? Since all calculations are based on the April 15th date anyway, I'm not sure what value there would be in doing an extension.
Reply to
Fred
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"Fred" snipped-for-privacy@NOSPAMgmail.com wrote in news:utfd1n$1lnhu$ snipped-for-privacy@dont-email.me:

Others will know the answers to those questions better than I do. But I do have one observation. Just because the divorce decree requires them to file jointly, if they both agree, they don't have to. If filing separately would result in lower tax they should consider that. They can still both pay half the total, even if filing separately would result in different amounts being owed by each.

Reply to
Stuart O. Bronstein

That's an interesting suggestion, but when I ran the numbers with each person filing separately, the total tax bill was the same as with joint filing. That's probably because their individual incomes and even withholding amounts were fairly close to one another.

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Reply to
Fred

"Fred" snipped-for-privacy@NOSPAMgmail.com wrote in news:utfj39$1n77i$1@dont- email.me:

So filing separately may solve the problems, and each can make their own payment arrangement.

Reply to
Stuart O. Bronstein

Unfortunately, it's not quite that simple. Although the total amount works out the same, the individual amounts on the separate returns are still different from the 50% they each agreed to pay. So right off the bat there is messiness in each having to work an amount owed with the IRS that's different from the 50% they agreed to pay.

There is also the complication that they have a child between them so in doing the calculation for Married Filing Separately, you have to assign the child to one of the parents. It turns out that because their incomes are so close, it doesn't matter which parent claims the child in terms of the total number, but it does affect the exact amount each person owes. So I can see a lot of bickering over which one gets the child on their return, and even if they are still in agreement that they each will pay 50% of the total, working out the agreements with IRS is going to be confusing.

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Reply to
Fred

If they file a joint return, the IRS can go after either or both of them for the full amount due on the joint return. Filing jointly means joint liability for the tax. The IRS is not bound by the divorce agreement.

I don't see any benefit in filing an extension. An extension postpones the filing deadline, not the payment deadline. If they file the return(s) by April 15, an extension is essentially meaningless.

Bob Sandler

Reply to
Bob Sandler

Joint and several liability can be collected fro9m either party.

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Reply to
paultry

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