Marrying someone and then finding out that they have back taxes doesn’t make you liable to pay your spouse’s tax debt. You can file a Form 8379 or Form 8857, allowing you to retain your own tax refund even in a joint tax return filing.
Realistically speaking, taxes is one of the financial aspects involved with marriage. Depending on the case, it can be an advantage or a disadvantage. If you ever marry and find that a tax liability exists, here’s what you should know.
Marriage and Taxes Owed
Getting married is a legally recognized partnership. This is why there are certain guidelines on tax obligations, filing a tax return, and handling tax debt.
The Internal Revenue Service (IRS) provides a number of recommendations for newly-married couples. It includes a review of tax info such as changing the surname after marriage or the address should you move into a new home. Remember that you’re always legally obligated to inform the IRS of any tax data changes on your end.
In terms of tax liability, couples have the choice of their tax filing status. Some couples are married filing jointly while some get married filing separately. Generally, a tax return filed jointly is more convenient and has more advantages. Opting to file jointly allows you to enjoy earned income tax credits, dependent care tax credits, and other benefits. Additionally, should you choose to file separately, you get fewer tax considerations.
What To Do When A Spouse Owes Back Taxes
It might feel stressful to suddenly be faced with tax debt, especially one that’s not personally yours. Thankfully, the IRS offers a couple of liability relief options that can help you sort out your looming financial woes.
Innocent spouse relief
The first one, known as the Innocent Spouse Claim, allows you to be relieved of the legal responsibility of sharing in the tax (including penalties and interest) of your spouse’s debt. If your partner, or ex-partner, omitted or incorrectly paid taxes, you can apply for an innocent spouse status.
Usually, the Internal Revenue Service guides you on what to do and what taxes are covered after filing IRS Form 8857. A general rule includes self-employment taxes and individual income but excludes household employment, individual shared responsibility, business taxes, and the trust fund recovery penalty.
Conditions for Innocent Spouse Relief
The following conditions for innocent spouse relief include the following:
- Filing a joint return with a tax understatement due to erroneous items such as unreported income or incorrect deductions, credit, or tax basis.
- Establishing innocence by declaring that you were not informed, or had no reason to know, that there was an actual understatement.
- Arguing that it would be unfair to also have you liable for the tax debt.
- Establishing that there was no fraudulent transfer of property or assets. This refers to schemes intended to defraud the IRS or another third party like a former partner or a business partner.
Injured Spouse Relief
The other type of relief that can help you should you find that your spouse owes back taxes is the Injured Spouse Claim. This claim, documented through the use of an IRS Form 8379, qualifies you to refund your share of the past tax filed jointly. The term refers to the spouse who has been affected by taxes to offset their partner’s back taxes. For example, the husband owes taxes from misrepresentation in his business or income. Filing jointly means the error from his filing will affect the tax file of the couple.
Coverage for Injured Spouse Relief
You can file Form 8379 should you find out that a tax refund you’re eligible for has been seized. An injured spouse is someone who has their tax refunds seized to cover their partner’s taxes. This can include the following:
- Federal and state taxes past due
- Debts owed to unemployment compensation agencies
- Unpaid child and spousal support payments
Conditions for Injured Spouse Relief
Conditions for filing an application as an injured spouse include: (1) establishing that you’re not legally obligated to the taxes past due and (2) having made and reported tax payments or previously claimed a refundable tax credit. Remember that for this process, both conditions must be met, unless the injured spouse resides in a community property state–Arizona, California, Washington, Idaho, Louisiana, New Mexico, Nevada, Texas, New Mexico, and Wisconsin.