IRS Form 8379: Injured Spouse Allocation

What is ‘IRS Form 8379: Injured Spouse Allocation’

If married spouses file a joint tax return and any overpayment is applied to one party’s past tax obligations, the “injured” spouse can file IRS Form 8379: Injured Spouse Allocation to receive at least a portion of the refund. An injured spouse can seek to have a refund of overpaid federal taxes, state taxes, alimony, child support or non-tax debt, such as a student loan. Typically, spouses are jointly responsible for a tax obligation, so an injured spouse should file Form 8379 as soon as he or she recognizes that a refund will be applied to a spouse’s previous obligation.

BREAKING DOWN ‘IRS Form 8379: Injured Spouse Allocation’

If a husband has fallen behind on alimony payments to a former spouse, and he and his wife file a joint tax return, the IRS can take the entire refund due even though only one spouse owes the debt. Thus, the term “injured” when referring to the negatively impacted spouse. IRS Form 8379: Injured Spouse Allocation is a request of the IRS to release the injured spouse’s portion of the refund.

If a couple files their return knowing any refund might be seized, the injured spouse can file the form with the joint tax return or do it separately.

It’s important not to confuse “injured” and “innocent” spouses. A person is deemed “innocent” when they may be facing criminal charges, back taxes or civil penalties due to a fraudulent tax return filed by his or her spouse without any knowledge. In this case, the innocent spouse should file Form 8857, not Form 8379.

Pay Czar Clause

DEFINITION of ‘Pay Czar Clause’

A pay czar clause is a buzzword describing a clause found in financial institutions’ employment contracts that would subject compensation terms to the U.S. government’s approval. These clauses would allow the financial institution to offer attractive bonus plans to employees, but also provide recourse in the event that the government prevents the payout from happening, either through regulations or direct intervention.

BREAKING DOWN ‘Pay Czar Clause’

As a result of the Troubled Asset Relief Program (TARP) in 2009, some financial institutions were the subject of much public outcry when it was found out that some of the bailed-out banks needed to pay millions in bonus pay as a result of employee contracts made prior to the financial crisis. Adding a pay czar clause to an employment contract will effectively leave the fate of executive compensation at bailed-out firms in the hands of the pay czar, the U.S. government’s official representative in charge of overseeing executive compensation.

Origin of the Pay Czar Clause

Pay czar was a nickname given to Kenneth Feinberg, the person appointed by the U.S. Treasury Department under the Obama Administration to monitor executive bonuses provided by financial firms that accepted bail-out money during the 2008-2009 crisis.

While many Main Street investors lost money on stocks and real estate, Congress voted to help struggling banks, brokers and insurers to the tune of $700 billion of taxpayer money. While these financially infused firms were part of the TARP, they continued to pay executives big bonuses.

That didn’t bode well with the general public; thus, the appointment of Feinberg and the reviewing of compensation plans. He had the power to approve or disapprove any bonus he thought was out of line or unnecessary.

Some of the beneficiaries of TARP included, Citi, Bank of America, AIG, Chrysler Financial, Chrysler Group LLC, General Motors Co. and GMAC Inc. Insurance provider AIG, for example, paid $165 million in bonuses to employees responsible for much of the credit derivative losses. Many of these companies insisted that they would lose key employees if contracts included bonuses but then were not allowed due to new governmental regulations and policies.

6 Fitbit employees charged with stealing Jawbone trade secrets

Six current and former employees of Fitbit Inc.
FIT, +0.41%
were indicted by federal prosecutors Thursday for allegedly possessing trade secrets of now-defunct fitness-tracker rival Jawbone. The six, who all moved to Fitbit after working at Jawbone, are accused of violating confidentiality agreements and knowingly possessing trade secrets; they could face sentences of up to 10 years in prison. “Intellectual property is the heart of innovation and economic development in Silicon Valley,” Acting U.S. Attorney Alex G. Tse said in a statement. “The theft of trade secrets violates federal law, stifles innovation, and injures the rightful owners of that intellectual property.” The two San Francisco-based companies had been involved in litigation, which was settled last year, in which Jawbone accused Fitbit of stealing its employees and trade secrets. Jawbone, which was valued at more than $3 billion in 2014, was liquidated last year. Fitbit shares are up about 30% this year.

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