Here is what happened today. Couple came in and as I was sorting their paperwork I found a 1099-C Cancellation of Debt in with their W-2s. The 1099-C, for a substantial amount of money, was in the spouse’s name. This little piece of paper caused the couple to lose their expected refund and owe a considerable amount of money. Neither was happy but the taxpayer was especially angry because he felt he was blindsided by the 1099-C. I don’t envy the spouse hearing about this all the way home (45 minute drive).
This was an extreme problem but I see variations of this all the time. One spouse gets a cancelation of debt on a credit card and doesn’t tell their spouse. Or, they don’t tell the other about gambling winnings until it has to go on their return. Or, one changes their W-4 at work because they want a little more in their paycheck.
Each tax season, I see too many of these surprises. I can’t do anything about the loss of a refund because of a 1099-C or gambling income but I can help you plan for it if you talk to each other and share the information. And really, did you think you could hide that casino jackpot forever?