Damsel in distress / taxing issues

Richard · Jan 31, 2003

Ok, Braintrust....

Time to help a damsel in distress.

Secnario:

The husband of a life long friend of mine recently lost his job. He's taken another job at 50% cut in pay. She works too. They have 2 kids that HAVE been in daycare. One child suffers seizures, so is actively seeing neurosurgons. (or someone of the like) Insurance for them is almost mandatory and VERY $$$

They are holding ONE nostrel above water financially now. The kids are now OUT of daycare, being tended to by a friend.

I'll stop there with the sad/bleak.

She assures me, they have cut all the fat off the bone (expenses) and are struggling day to day to make the most of their life in the land of the free.

I had a "squirrelly" idea hit me and it's the thrust of my question....

I know this is bordering tacky, immoral?, sneaky... I can hardly think of any "positive" things to call it... HOWEVER... if it will legally help them, it might be worth investigating.

Scenario: What if they went to courthouse and divorced? Stayed "living" together... (and even kept "divorce" secret). The ONLY people that need to know about the divorce, would be them and the IRS.

If they divorced... and the one WITH the insurance had the kids under their "custody", the kids would be covered. At same time, put house in OTHER ones name (either one).. so that THEY can take full deduction... erase the "marriage penalty"...

If in say, 1 year this "whammy" on them goes away... they can always "renew" their vows... and become "legal" again.

I'm smart enough to know that there is TONS I do not know.

I'm just trying to think of creative (stupid?) ways to help her/them ease some of their financial burdon.

Any tax accountants out there that might consider weighing in on this?

What a topic on a tractor forum. Oh.. and I looked at a Deutz/Fahr yesterday. (timidly relating this to tractors /w3tcompact/icons/wink.gif )

Thanks
Richard

dmccarty · Jan 31, 2003

Richard,

I can see a couple of possible problems. One is that with the
scenario you proposed its likely illegal in a couple of different
ways for them to divorce, stay togather but then tell the
IRS they are not married. If the IRS audited them they might
look at the whole scheme as a tax avoidance scam. Then
they would have to fight the IRS in court.... Not a place I
want to be....

Course the IRS has to audit them so that is a long
shot. But how much would they "save" by going through
these hoops. I have heard of people doing this to qualify
for health care but it sure seems like there would be a dozen
or saw laws that could get one in trouble.

Also in some states, NC is one of them, it is illegal to live
togather. /w3tcompact/icons/smile.gif Believe it or not. /w3tcompact/icons/smile.gif And people have
been tried and convicted on the charge but the last case I
heard about was around 1994/1995. So that might be a risk
but a small one.

Have they checked with local, state and Federal governments
to see what aid is available? A few years ago we where
checking into daycare and where told that the state and local
government subsidized daycare. 100% of the cost of daycare
could be covered depending on income level. We where
shocked at how much money a family could make and still get
aid from the G'ment. We where just trying to find daycare
and they kept trying to push the aid our way but we did not
qualify.

Hope this helps,
Dan

BB_TX · Jan 31, 2003

I agree with Dan. Try the legal solutions. My wife and I own a day care and many of the children are subsidized by the government. They pay according to the family situation. As much as I hate some of welfare programs that are so easily abused, sometimes they are necessary and essential. They may qualify for other government programs such as food stamps, etc. Good people who are down on their luck and trying to get up, deserve help. Just wish they could find a way to weed out those who are simply along for the ride.

hazmat · Jan 31, 2003

I'd guess that the cost of the divorce would outway the marriage penalty.

I'm no accountant, but from your description, it sounds like they are not making big bucks. It was my understanding that the marraige penalty only applied when both earners are in the mid-upper tax brackets.

Also, isn't it only about $2,000? Let hubby get a second job pumping gas or bagging groceries, should be able to make up the cash working an extra 10 hours a week.

Last option, wait for Congress to eliminate the marriage penatly as Pres. Bush asked them to in is SoU speach.

cstocks · Jan 31, 2003

<font color=blue>Let hubby get a second job pumping gas or bagging groceries, should be able to make up the cash working an extra 10 hours a week.</font color=blue>

10 hrs. x $6 an hour -20% tax = $48 a week and that does not include SS and state tax. That'll pay for the gas to get back and forth to work w/ enough left over to have a balogna sandwich and a bag of chips every day he works for minimum wage. I am afraid that even forty hours a week at minimum wage would not be very much help.../w3tcompact/icons/sad.gif

I knew a couple in Lousiana several years ago that divorced for financial reasons and continued to live together after that. I do not remember the financial gain from their arrangement but they never got caught. Good thing (?) about their situation is a few years later their relationship fell apart and they split up without having to go through a divorce!/w3tcompact/icons/laugh.gif

wichiwichi · Jan 31, 2003

What marriage penalty???? I've been on both sides and its a whole lot worse on the single side.

hazmat · Jan 31, 2003

<font color=blue>10 hrs. x $6 an hour -20% tax = $48 a week and that does not include SS and state tax. </font color=blue>

$48 x 52 weeks = $2,496 which I ***think*** is more than the marraige penalty.

I wholeheartedly agree that working for min wage gets you nowhere fast.

RanchMan · Jan 31, 2003

Richard -

I've debated if I should respond or not, but decided I will. I won't beat anyone over the head, but I'll make some comments based on personal experience and observations I've made during life. Please note, these comments have nothing to do with how nice your friends are nor are they intended to convey not feeling badly for them. That being said, here goes....

I have to honestly state that I do not know if the potential "solution" you were thinking about is legal or not, however, I would suspect it is shady at best legally, and morally/ethically? Well - I'll let you guess my answer there. /w3tcompact/icons/sad.gif I wonder what the Big Guy upstairs may say to implementing such a scheme... /w3tcompact/icons/hmm.gif

I understand they claim to have "cut to the bone," however I've known ***LOTS*** of people who have claimed the same such thing, yet when you look at how they spend their $, there is plenty of room to cut back more. I'm not saying folks shouldn't be able to spend their money as they see fit (FAR from it!) - I'm just saying that "cut to the bone" is often defined by folks to mean giving up a few nice things in life, but basically maintaining the same socioeconomic lifestyle.

Believe me, I have first hand experience with the whole medical bill situation and understand its strain, however, I honestly suspect there is more they could do to "get through" such a time. It may mean selling a car, it may mean working 20 hours a week extra (or weekends) in addition to the 40 or 50 they are currently working, it may mean even selling their house (assuming they have one) and moving in to something much smaller, it may mean they have to buy cheaper foodstuffs, it may mean they have to sell some personal possessions, it may mean.....etc. You get my point, yes, unfortunate and sad, but things that most folks could do to get through.

I have known some pretty destitute folks in my time, but they made things "work" and eventually got to the point where they were back on their feet again. They had to go without a lot of the conveniences - but they were able to do what they needed to.

I understand you are simply wanting to help your friends out, and it sounds like "lady luck" hasn't been in their corner lately, however, I suspect that they haven't exhausted all their options and I'd sure hate for you to encourage them to do something like this.

Just my $.02

beenthere · Jan 31, 2003

Ranchman
You said that very well!! I also wanted to reply, but couldn't have said it better. I feel badly for someone in these predicaments, and through our Church, try to help these people whenever I (we) can. And I too do not know all the details of what (if anything) they can cut back on, but in similar situations I know of, people are not even close to "cutting" back. The life style we grow into is very habit forming.