Women are caring and nurturing creatures, but we can sometimes be taken advantage of. Read on to learn about two ladies who fought their own tax battles and the lessons we can learn from the mistakes they made in filing taxes.
Crazy cat lady takes on the IRS
Ms. Jan Elizabeth Van Dusen is a woman whose passion is the care and feeding of feral cats. She was audited for her charitable contributions tax deductions relating to her work with cats. Not happy with the IRS for denying her those tax deductions, she had her day in court. She represented herself—and did a pretty good job. The Tax Court took 42 pages to explain that it agreed with her position and allowed her to take some of the deductions she had originally been denied.
She would have won on ALL her tax deductions if only she had gotten receipts for all items over $250 from the organization with which she worked—Fix Our Ferals, an IRS-recognized 501(c)(3) nonprofit organization dedicated to providing free spay/neuter clinics for feral cats in San Francisco’s East Bay area. Without those receipts, she lost out.
What do we learn from Ms. Van Dusen’s story? Three things:
- Volunteers’ out-of-pocket expenses are deductible if the organization keeps detailed records and receipts for your expenditures.
- When your volunteer costs are $250 or more for any set of expenses, submit the information to your non-profit organization. Have it issue a receipt to you—before filing taxes.
- Don’t let the IRS bully you into accepting its audit determination. Ms. Van Dusen’s story proves that even a private individual can take her fight all the way to Tax Court—and win.
Ex-husband runs business under ex-wife’s Social Security Number
Oley opened a business for her husband using her Social Security Number while they were married. (It is unclear as to why he didn’t just use his own SSN.) They got divorced about a year later, and Oley asked him to stop using her SSN. Naturally, he said he would, but unfortunately this was not true.
Oley found out that he was still using her SSN two years later, when she was filing taxes and the IRS started sending her unpleasant notices. This problem is not unique; it happens all the time.
This is a tough problem that Oley will be battling for about a year, but it could have been prevented easily, before reaching this point. Her divorce attorney should have taken some common-sense actions before the divorce was finalized. (It’s nonsense like this that inspired TaxMama’s course “A Tax Checklist For Knotty Divorces.”)
What can we learn from Oley’s story? Six things:
- Never open a business for someone else using your SSN. Not even when you are married to that someone, and especially if you have a sense that the marriage is ending.
- If your spouse needs your SSN because he or she has prior tax problems, you need to think that he or she is capable of creating new problems—for you.
- If your spouse can’t start a business without your SSN, suggest that he or she gets a job rather than getting you into trouble too.
- Ensure that she or he gets a new business ID number before the divorce is final. Include this as part of the divorce transactions. Have the Court instruct your ex to issue new W-9 forms with his or her SSN to all those who pay the business.
- To be safe, upon separation from your ex, write to the IRS to notify it that you are not operating [BUSINESS NAME] under [SSN]. Any income generated under that business name and your SSN rightfully belongs to [EX-SPOUSE’S NAME and SSN]. Send a certified copy to your ex and his or her attorney.
- Notify all companies that normally send your spouse a 1099 using your SSN. If you don’t know who those companies are, file a request for copies of W-2s and 1099s for the last two years using Form 4506-T. Simply check box 8. You will get copies of the 1099s with your SSN, along with the companies’ names and addresses.
You never need to feel powerless or abused by the tax system or former spouses. There’s always a way to help yourself—and for people to help you.
Eva Rosenberg, EA is the publisher of TaxMama.com , where your tax questions are answered. Eva is the author of several books and ebooks, including the new edition of Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.