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Loss of Tax Overpayment By an Injured Spouse

Posted on October 27th, 2016


Internal Revenue Service is allowed to take a taxpayer’s overpayment and apply it to prior federal or state tax balances, to delinquent student loans, or to child and spousal support obligations. When it applies such overpayments from joint tax returns, IRS applies the whole overpayment to the prior debt, even though the debt may have been that of only one spouse. In that case, IRS may be taking money to pay the debt of the Debtor Spouse from the non-debtor spouse, the Injured Spouse.

On request, IRS will go through a computation of what portion of the tax due on a joint return, and what portion of the payments made toward the tax, belong to the Debtor Spouse and the Injured Spouse. The Injured Spouse requests this computation by completing Form 8379–Injured Spouse Allocation.

Form 8379 can be filed with the couple’s joint income tax return, or separately after IRS has seized the tax overpayment. Form 8379 allocates all income to the person who earned the income. Jointly earned income, like bank interest or dividends from joint accounts, is allocated half to each spouse. Withheld tax is allocated to the individual who earned the income from which the withholding is taken.

Estimated tax payments and payments to extend the due date for filing the tax return are allocated as the couple agrees. They can be allocated wholly to the Injured Spouse.

Itemized deductions are allocated to the person who pays the deductible amounts. The Standard Deduction, if elected, is divided equally between the spouses. Personal exemptions are divided between the spouses according to which spouse would be entitled to each exemption if the couple filed separate returns.

The instructions for Form 8379 instruct people from community property states how to allocate their income, withholding and tax payments under community property rules.

Injured Spouses are distinct from Innocent Spouses who can, in some circumstances, be excused from paying tax on unreported income earned by the other spouse.


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