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Women Describe Tax Nightmares Caused By Delinquent Ex-Husbands

Thu., Feb. 12, 1998

Elizabeth Cockrell says she left a marriage of three years with only pots and pans, too proud to take a nickel of alimony. Eighteen years later, she faces a $650,000 tax bill that she blames on her ex-husband’s business dealings.

Cockrell urged the Senate Finance Committee on Wednesday to call off tax collectors who pursue spouses for debts on income they never saw. “I left with nothing from my marriage,” Cockrell said. “My husband was involved with partnerships before he even met me. … I knew nothing about them.”

‘The American tax system mistreats divorced women,” she said.

Cockrell and three other women delivered dramatic testimony, contending they were unjustly pursued by the IRS for tax debts of their former husbands. Josephine Berman of South Orange, N.J., said she faces a $400,000 tax bill due to improper deductions made by her former husband on their 1968, 1969 and 1970 tax returns. The IRS has seized her $40,000 IRA account and has slapped a lien on her home.

“I have existed under the black cloud of an immense tax debt for the last 28 years,” Berman said. “I was never involved in any of my husband’s business activities nor was I ever included in any business or tax decisions.”

The Senate panel called the hearing on so-called “innocent spouses” in tax disputes as it works on a bill to restructure the Internal Revenue Service.

An IRS spokeswoman, citing taxpayer confidentiality laws, would not comment on the individual cases. But the Clinton administration unveiled plans this week for innocent spouse relief, which includes specially trained IRS workers and procedures to handle innocent spouse cases.

“While these efforts are good, I’m afraid they do not go far enough to protect those who need protection the most,” said Finance Committee Chairman William Roth Jr., R-Del.

Under current law, each spouse is responsible for the full amount of income tax due for a joint federal tax return under a legal concept called joint and several liability. That enables the IRS to pursue one spouse for payment of back taxes if the other is unavailable.

The law provides limited relief to spouses who can prove they didn’t know a tax return contained an error or understatement of taxes. Such innocent spouse relief is difficult to obtain.

Several common themes ran through the women’s testimony Wednesday:

After divorce, the IRS sent delinquent tax notices in both their names to the address of their former husbands, notices the women discovered only years later. Long delays in notification served to magnify the size of late payment penalties and interest.

Inconsistent IRS collection practices that seem to target the spouse least able to defend themselves. “There should be a logical process for disputes like mine, and one that does not require unlimited funds to file a lawsuit,” said Karen J. Andreasen of Tampa, Fla.

Failure to inform the spouse about any collection action against the ex-husband.

New York Law School professor Richard Beck, testifying at a later panel, estimated the IRS attempts to collect from the wrong spouse in at least 50,000 cases a year.

Despite the compelling testimony, the Senate panel remains unclear how to respond. The committee is reviewing a House-passed IRS restructuring bill that contained numerous provisions to protect innocent spouses, such as automatically suspending collections against one spouse when the other is contesting a proposed joint assessment in tax court.

Roth is deliberating whether to modify joint and several liability by making each spouse responsible for his or her share of the income on a tax return. The Clinton administration opposes this approach.

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