At My IRS Audit, I Thought My Accountant Would Be Most Important

...Boy was I wrong!

I'd been separated from my husband for two years. My divorce was final. My life was moving forward as a single Mom. I went to work everyday, paid my bills, paid my taxes, obeyed the law, maintained a civil but clearly separate relationship with my ex-husband—lead a rather ordinary existence! Then came THE LETTER.

In it, the IRS claimed that I had failed to respond to a previous correspondence--which I never received. In it the IRS notified me that my now ex-husband and I were being audited for 2004--the last year we filed a joint return. I contacted "our" accountant--who is in a state where we used to live, reviewed the worksheets and copy of the return, looked frantically for backup/support documents, spoke to my ex-husband, and made an appointment with the IRS auditor.

Attending that audit without legal representation was a hugely costly mistake. So many of an auditor's decisions are arbitrary and based on "gut-instinct"—they can choose what and/or who to believe or not believe. After deciding to disallow many of the deductions (including our older son's college tuition!)—on a whim, the auditor decided to set another audit for an earlier year! It had become clear that the auditor had it in her mind that she set all the rules and was going to pursue us to whatever degree she desired.

The second audit resulted in an additional new debt to the IRS. Although a slightly smaller one than the first, the combination of the two years equalled $20,000! How ironic to now have a joint debt to the government when my ex-husband and I no longer have a joint anything else! The real questions became: Who was allowed to negotiate on my behalf? Who was responsible for repayment of the $20,000? Who was accountable if the responsible party failed to make repayments? In talking with the IRS it became clear that they would hold me liable for the entire amount, plus associated penalties and interest, if my ex-husband (considered the "responsible party") failed for any reason to repay the debt.

The greatest irony is this: had I not committed in writing in the final divorce decree to share in repayment of any IRS debt incurred during our marriage (of which I was unaware at the time of the divorce), my share of the $20,000 debt would be zero! My ex-husband is considered the primary taxpayer for those years and only his social security number is indicated on the debt & repayment plan. Any monetary contribution of mine would have been considered voluntary. So I have to ask myself: Should I have had an attorney more closely review the tax obligation portion of my divorce decree? Should I have had an attorney available at the first audit hearing? At the second audit? Yes, Yes and Yes—because I certainly now know that having an attorney negotiate the repayment plan, and protect me should my ex-husband not fulfill his obligation would be priceless…

I’m a good and honest person, I used an experienced professional accountant and paid my taxes on time—why would I ever need an attorney?