In 2006 my ex-husband and I decided to separate and move to different cities. In September of 2006 my ex-husband decided to sell our house through a short sale. I filed my taxes for 2006 on my own since we separated and I reported my wages for 2006 and received a refund. This year however I received a letter from the IRS stating that I didn't report a 40,000 cancellation of debt for 2006 and I owe $11,066 in taxes. I have no idea how this happened to me. I never received any paperwork on the short sale of the house because my ex-husband was handling all of that. Also, I don't understand why the IRS is only after me, shouldn't it be under both our names? I really need help will you please provide me with some solutions? I have to pay this money by March 12, 2008 and I don't have a cent to drop dead.

Okay. First, the IRS sent the letter to BOTH you and your ex-husband, probably because the house was in BOTH of your names.

You can avoid paying this money by filing an amended return and filing Form 982 to account for the Form1099-A you apparently never received.

RUN (don't walk) to a competent, local tax professional to help you on this. It will require that he/she call the IRS to get an extension on the deadline, because we are ALL VERY BUSY right now, and your local tax pro will want to wait until late May or June to deal with this issue.