My chronicle of how the IRS and Tax Court affect taxpayers' daily lives.

See below for important disclosures.

Saturday, January 23, 2010

Ex-Spouse is assesed Trust Fund Recovery Penalty

Jeane L. Dintelman, v. United States of America, U.S. District Court, E.D. Arkansas, 2010-1 U.S.T.C.  (Jan. 7, 2010)

A husband and wife incorporated an entity which listed the wife as the President of the company (with the thought that a woman-owned business would be eligible for more contracts), even though she had lmiited responsibilities and duties in the business.  Subsequently the couple split up, even though the wife remained as an employee of the company. 

The finances, handled by the ex-husband, were in shambles, and the company failed to pay their employment taxes.  The IRS has the ability to pierce the corporate veil and assess these taxes to an individual taxpayer if they are deemeed to be a "responsible party."  The ex-wife, who was not involved in the mangagement of the company until its struggles became obvious to her, was still deemed a responsibile party by the courts. 

Aaron's Take:  If you are taking the title of President or CEO of a company, you best be involved intimately in all the activities of the business.  Love and Business are two distinct and separate activities, and you should never sign something just because your spouse tells you to.  My wife sure doesn't!  She even reviews our tax returns, even though she knows I'm "the expert!"

How to find out you're being audited long before an agent shows up!

The IRS has issued Tax Tip 2010-13 reminding taxpayers how to obtain transcripts and copies of previously filed tax returns.  A taxpayer may obtain, for free, tax return transcripts, which are summaries, or account transcripts, which show activiy such as IRS communication, filed extensions, assessment, tax return filing dates, payment informatin, and balances due. 

The transcript may then be used for lending purposes, if the loan requires the individual's tax returns.  The IRS provided transcript will confirm marital status, adjusted gross income, and taxable income.  Taxpayers may request these reports over the phone (800 829-1040) or by filling out form 4506T.  The transcripts shoudl be received between 10 and 30 days from when the IRS receives the request. 

An actual copy of a previously filed tax return may be obtained by filing Form 4506, Request for Copy of Tax Form. A fee of $57 per tax year will be assessed and the request will take much longer (up to 60 days). Copies may be obtained for the current year and the past six years.

Aaron's Take:  The transcript may also give you up to a 6 month head start on preparing for an audit.  Recently, more activity codes have been showing on transcripts which may indicate "return selected for audit."  If caught early enough, you can begin preparing for an audit long before it is ever assigned to a Revenue Agent (auditor). 
Aaron Blau, E.A. is the Vice President of the Central Arizona Chapter of Enrolled Agents and a member of the Government Relations Committee of the National Association of Enrolled Agents. The opinions and ideas expressed here are in no way representative of the official position of the National Association of Enrolled Agents, Arizona Society of Enrolled Agents or the Central Arizona Chapter of Enrolled Agents.

For official comments, please e-mail NAEA Director of Communications at or Arizona Society president

"To ensure compliance with the requirements imposed by the IRS, we inform you that, to the extent this communication (or any attachment) addresses any tax matter, it was not written to be (and may not be) relied upon to (i) avoid tax-related penalties imposed under the Internal Revenue Code, or (ii) promote, market or recommend to another party any transaction or matter addressed herein (or in any such attachment). In addition, nothing herein is intended to convey an expression of an opinion as to the likelihood a tax position would ultimately prevail if challenged by the IRS. This communication is intended solely for the person to whom it is addressed; no one else should rely on the tax advice provided herein. The person to whom this advice is addressed is under no obligation to keep the advice or matters related to the advice confidential."