Tax liability for spouses all depends on the status of your marriage when your spouse filed that return.
It’s a reasonable question in all sorts of situations: If my spouse owes back taxes am I liable?
The answer always depends on your relationship status at the time your spouse incurred the tax debt. It also relies heavily on whether you filed jointly.
Fact: When you file jointly, you assume “joint and several liability,” which means that each taxpayer is legally responsible for a debt.
If your spouse incurred tax debt before you married…
You have no liability for tax debt incurred before you entered the picture officially. So, if your spouse owes back taxes from before you got married, then those debts are solely theirs to repay.
As a result, you may qualify for “Injured Spouse” status if the IRS intercepts your refund to cover back taxes for your spouse. If you file jointly and don’t get a refund because the funds went to pay their debt, you can get your part of the refund back.
If you filed jointly the year your spouse incurred the back taxes …
In this case, your liability depends on a few things:
- Did you know about the filing issues that led to the back taxes?
- Are you still together?
- Have you benefited at all from the fraudulent IRS tax return?
If you can prove that you didn’t know your spouse filed incorrectly, you may qualify for Innocent Spouse. However, you must be able to show that you had no knowledge of the understated taxes, and could not have reasonably known.
In addition, you can benefit from any refund received for the year your spouse the understated taxes.
If your spouse decides to take you on a Caribbean cruise after receiving a $10,000 tax refund even though you’ve never received that much previously, would it jeopardize an innocent spouse claim?
If you ignore signs that something isn’t right, the IRS is unlikely to grant you an Innocent Spouse Relief claim. The IRS does not consider willful ignorance a good reason not to know about a tax issue.
However, if you can prove you did not know about the false filing and didn’t benefit from it, then Innocent Spouse may apply. If you qualify, you would enjoy full tax debt forgiveness on any back taxes owed.
If you weren’t together when the filing occurred…
In some cases, joint filings can occur even if you aren’t really together. Maybe you’re still married, but you live apart and are heading for divorce. Your spouse may file jointly because that’s what you’ve always done.
In this case, you can qualify for “Separation of Liability Relief,” which means that you are no longer married and wish to assume partial liability. If you can show you are divorced, legally separated or have not lived together for at least 12 months prior to your claim, then you may qualify.
Failing relationships make for messy tax situations
If you want to qualify for any of the statuses listed above, be ready for the IRS to get into your business. “Significant benefit” means the IRS will look at your life to see if you got a gift or something else of value. If you want separation of liability, then you’ll need to show you’re really separated.
In addition, when you file for Innocent Spouse, they will contact said spouse to get any “relevant information.” In other words, your former estranged spouse may try to use the opportunity to make sure you’re on the hook, too. If they can show that you knew, then the best you can hope for is separation of liability.