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If My Spouse Owes Back Taxes Am I Liable?

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Whether you are currently married, separated, or divorced, if the filing status you used was married filing joint, then both of you could be held liable for the tax debt.

In the case of a married-filing-joint tax return, both spouses are responsible for the tax debt (including penalties, interest, or additions to tax) arising, even if you later divorce. This holds true even if a divorce decree states that only one spouse will be responsible for any back taxes arising from previously filed returns.

Though this seems harsh, there may be relief available. These are the following scenarios in which back taxes could be owed and your potential for relief.

Scenario 1: You were married filing joint when the back taxes were incurred

Form to fill out: Request for Innocent Spouse

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 Relief.” However, you must be able to show that you had no knowledge of the understated taxes and could not have reasonably known.

You won’t receive a refund for that tax year. However, you’ll receive full tax debt forgiveness on any back taxes if you qualify for Innocent Spouse Relief.

Scenario 2: You were legally separated when the debt occurred

Form to fill out: Request for Innocent Spouse

The IRS also offers other similar relief plans such as “Separation of Liability Relief,” which means that you are no longer married and wish to assume partial liability.

If you filed a married filing joint return, the IRS would allocate the understated tax (plus penalties and interest) between you and your spouse/ex, and each person would be liable to pay the balance attributable to their income.

To meet the requirement for this relief you must meet the following requirements:

  • You are no longer married or legally separated
  • You were not a member of the same household for the 12-month period before you filed for relief

The Innocent Spouse Relief form must be filled out to qualify for Separation of Liability Relief. Once the IRS has the required document, it will be reviewed to see which relief would best fit your circumstances. Request for Innocent Spouse Relief form covers both Separation of Liability and Equitable Relief. (Source: IRS-CommunityProperty)

Equitable Relief is available if you did not qualify for Innocent Spouse or Separation of Liability. This program relieves you from the taxes owed if it would be unfair to hold you accountable. This is based on factors that determine fairness.

(Source: Equitable Relief IRS Page)

Scenario 3: You were together, but there were extenuating circumstances

 
Form to fill out: Request for Innocent Spouse

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. 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.

Scenario 4: If the back taxes were incurred before you were married

 
Form to fill out: Injured Spouse Allocation

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, with few exceptions.

When you file jointly, then you assume “joint and several” liability. That means you’re on the hook for any taxes your husband owes. If you file separately (individually), then you would not be liable because you both assume individual liability.

However, just because you are not liable, it doesn’t mean your tax refund won’t be intercepted. Even if you weren’t married when your spouse incurred the debt, the IRS may intercept your refund now. In this case, you apply for Injured Spouse status to get the money you’re owed. Another exception to this scenario would be if you reside in a Community Property State.

Community Property States

There are currently nine states in the United States that are community property states. These laws could affect back taxes if they were incurred before you were married.

Community property refers to all acquired assets in marriage by either spouse. This can be income, real estate, or even debt. In a community property state any income or other assets accrued by one spouse, now belongs to both spouses. It is as if they own everything equally, regardless of who purchased it originally.

Therefore, if the debt incurred before marriage and you reside in one of the 9 states, you would need to fill out an Injured Spouse Allocation Form for relief. Injured Spouse relief is available if your federal tax refund was reduced to cover your spouse’s debt. (Definition Source: IRS Defines Community Property)

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

There are currently only 3 states, Tennessee, Alaska, and South Dakota, that passed legislation for married couples to “opt-in” to community property through Community Property Trusts. Source: IRS Website.

Options when a spouse owes back taxes

In any case, you will want to ensure the necessary paperwork has been sent to the IRS to qualify for relief. This graph gives you a quick reference of which form you will need depending on when the debt incurred.

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. The IRS will evaluate if you received any significant benefit from filing by your spouse or ex. “Significant benefit” means the IRS would 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 a separation of liability.

If you’re facing problems with the IRS through no fault of your own, connect with a certified tax professional to talk about your options.

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