Affordable Tax Installments Turn Things Around for Divorced Client

Patricia Carson

After 40 years of marriage, Patricia Carson was finally able to leave an unhappy relationship, but not without some unintended financial consequences.


Patricia says that she and her husband differed on how and when to file their yearly income tax returns.  Patricia continues, “Every year we would argue because I wanted to start filing my returns as ‘married filing separately,’ but he’d refuse, and we’d get into a huge fight. Eventually, I’d give in and just hand over all of my tax forms.”


She says that the process of leaving her husband and becoming independent was a long one. “In the early part of our marriage, I stayed home with our children, but as they got older, I began attending community college.” Patricia did well in school and eventually received full scholarships to pay for a graduate degree. In 2014, she set her sights on finishing her PhD and set-up a research project that would allow her to write her dissertation. She moved to Albany to begin the project, but within a matter of days, she ended up in the hospital because of an autoimmune disease. Having no other option, she moved back to Long Island.


In 2016, Patricia was finally feeling better and working again. And began preparations to officially leave her husband and started looking for a place to live. A few months later, she found a residence in Albany County and secured a job with a community organization in Hudson, New York.


By 2017, the divorce was finalized, but as part of the agreement, she felt railroaded into holding a mortgage. And because of a miscommunication, she won’t get any payments for the mortgage until June of 2019. With no other way to pay for housing, Patricia decided to withdraw money from her IRA. This decision was based on advice from the family attorney, but unfortunately, he didn’t relay the tax liability of this move.


After purchasing the new home and submitting her tax return, she began receiving notices from New York State Department of Taxation and Finance (DTF). Due to a high amount of unpaid taxes, they were threatening to take away her driver’s license. “I was very worried. Because if I don’t have a license, I can’t drive or work.”


Patricia had assumed that when she handed over her tax returns, her husband was filing them, but that wasn’t the case.   Then, when they received no tax return from Patricia, New York State’s Department of Taxation and Finance prepared their own substitute for her, resulting in tax assessments. The situation was compounded by the tax and penalties incurred from taking money out of her IRA. Patricia says, “I eventually learned that I owed $20k to the federal government and $10k to the state in taxes – because the IRA withdrawal was seen as income for the year.” She explains, “No one told me that I’d owe taxes for taking out this money.”


Patricia says that, in a panic, she turned to Google and contacted the Legal Aid Society of Northeastern New York (LASNNY). “I was put in touch with Krzysztof Wendland,” she says. “He helped me in a miracle sort of way. Krzys set up a payment plan with NY State and the IRS and I feel like I owe him my entire life. If I hadn’t had Krzys’s help, I might very well be in jail right now.”


Krzys explains, “Ms. Carson was a client of our Low Income Taxpayer Clinic (LITC).  We represent clients who face issues with the IRS, and NYS DTF if there is a corresponding issue.” While working on Patricia’s case, Krzys was able to replace the substitute for return, correct Patricia’s debt, and negotiate affordable installment agreements with the IRS and NYS DTF. These agreements brought Patricia into compliance with her tax obligations and she was no longer subject to collection actions such as wage garnishments and bank levies, and placed the driver’s license suspensions on hold.


Most importantly Krzys also represented Patricia in a NYS Conciliation Conference in order to fully cancel the driver’s license suspension.  This allowed her to keep driving to work and to shop for groceries, essential parts of her new life, without the threat of her driver’s license being suspended even if life events prevent Patricia from maintaining her installment agreements.  Krzys explains, “The NYS DTF suspends driver’s licenses of taxpayers who owe more than $10,000 and, until recently, had no hardship exclusions from this program.” Fortunately, the 2020 NYS budget has now changed the driver’s license suspension law and allows for exclusion from the program for taxpayers on public assistance or who are experiencing economic hardships.


Thanks to Krzys and the Legal Aid Society of Northeastern New York, a heavy load has been lifted from her shoulders and Patricia is embracing her new life. She works as a part time sociology professor at Hudson Valley Community College as well as a CDC-trained diabetes prevention lifestyle coach. She’s also working on a memoir/self-help book that she says is geared toward other women who are feeling stuck in tough situations.


“Both of my jobs are wonderful – they connect me with people and that’s great because I love people.” Patricia continues, “Most importantly, I’m back on my feet again. I’m not making a ton of money, but I’m working and making on-time payments to the IRS and to the state.”