If you are married or marry someone who owes back taxes, you are not liable for the debt. The IRS provides relief options for those who file jointly and individually. If your spouse owes back taxes, filing Form 8379 allows you to keep your refund. A tax professional will be able to assess your unique case and review your options.
Getting married has many financial perks including tax benefits, but what happens if you marry someone who owes back taxes? The topic is far from romantic, but knowing what to do in this situation will put you and your loved one at ease.
If you found out your partner owes back taxes, there are steps you can take to protect yourself financially. Although filing joint taxes as a married couple allows you to claim several tax credits and deductions, it also means that both people are responsible or the money owed to the IRS.
Fortunately, the IRS provides three types of relief for innocent spouses. Let’s dive deep into the topic and review what you need to know if you marry someone who owes back taxes.
Divorced Spouses and Tax Obligations
The IRS provides information for divorced or separated individuals under Publication 504 (2021). The document states that in particular cases, a spouse may be granted relief from tax liability that was incurred while filing jointly as a married couple. This includes back taxes, penalties, and interest.
When filing jointly, both parties are liable for any taxes owed. A divorce does not eliminate each person’s responsibility owed to the IRS. When you divorce, you may state on the divorce decree any obligations to be enforced by family court. In addition, you may also apply for relief with the IRS.
Tax Obligations For Widows and Widowers
When a spouse dies, debt from tax returns that were filed jointly falls under the responsibility of the surviving spouse. Filing a joint return means that each individual is held liable for any back taxes, no matter who caused the debt.
The only way to not be held liable is by filing taxes individually instead of jointly. The executor for the deceased partner is responsible for the final tax returns filing. If taxes are owed, the IRS may use the spouses’ estate to pay off the debt. If the estate does not cover the whole tax liability, the surviving spouse will be liable for the remaining portion.
Married Couple Who File Tax Returns Jointly
According to Publication 504 (2021) published by the IRS, filing status for married couples who marry prior to the end of the tax year is called married filing jointly. Both parties must report their incomes, credits, deductions, and exemptions on one tax return.
Married filing jointly is considered to be the best choice in the case of only one spouse making most of the income. However, if both partners generate comparable income and deductions are significant and very different, then filing individually may be a better choice.
When using the married filing jointly status, each individual must understand their equal responsibility for any taxes due, penalties, and other debt incurred. The exception is when one spouse can prove to the IRS that they had no knowledge of mistakes that caused the liability and did not benefit from it.
Filing Jointly vs Separately
Under the married filing jointly status, the tax liability is frequently less than the sum of both individual tax liabilities when filing separately. This is because the IRS provides incentives to file under the married filing jointly status.
The following benefits apply to married couples who file jointly and are not available under the individual filing status:
- Earned Income Credit (EIC)
- Child and Dependent Care Credit
- American Opportunity Tax Credit (AOTC)
- Lifetime Learning Credit (LLC)
- Saver’s Tax Credit
A key difference between filing jointly vs separately is that the joint tax return is more likely to receive a larger tax refund or a smaller tax liability. However, each case is unique and this doesn’t always apply. You must consult a tax expert to calculate the refund or tax liability of filing jointly vs separately to determine how you should file.
Innocent Spouses May Qualify for Three Types of Relief
If you find yourself liable for your partner’s tax debt, there are three options that you can use to possibly limit or eliminate your tax debt. Although there are plenty of resources online, non-responsible spouses should contact a tax debt attorney to ensure proper filing or contact the IRS for guidance.
The three relief options available are Innocent Spouse Relief, Separation of Liability Relief, and Equitable Relief.
1. Innocent Spouse Relief
Innocent Spouse Relief allows you to be relieved from taxes owed if your current or former spouse:
- Did not report income
- Reported income improperly
- Claimed credits or deductions improperly
To qualify for Innocent Spouse Relief, you must meet all of the following conditions:
- You filed a joint return with your spouse that includes an understatement of tax, which is exclusively attributable to the erroneous item by your spouse. This can include income earned but not reported by your spouse on the joint tax return. It also includes credits, deductions, and property reported incorrectly on the joint tax return without your knowledge.
- You can establish that you were unaware and had no reason to know that the tax return had an understatement at the time you signed the joint return.
- You can establish that it would be unfair to hold you liable for any understatements of tax by taking into consideration all the circumstances and facts.
If you are divorced, assignment of tax liability should be included in your divorce decree. Your divorce decree likely states that the IRS is not bound by the assignment of tax responsibility. The decree may be able to assist you in demonstrating particular facts to the IRS.
These facts include:
- Abuse by your spouse
- Knowledge of proper tax filing
- Knowledge of taxes owed being paid
- Knowledge of the extent in which you benefited from unpaid taxes
In this case, your divorce attorney is advised to consult with an experienced tax relief attorney to properly negotiate the divorce settlement.
Regardless of the timeline of your divorce, the application for Innocent Spouse Relief must be submitted within two years after the first attempt by the IRS to collect the tax debt.
2. Separation of Liability Relief
To qualify for Separation of Liability Relief, you must not have had knowledge of any item that caused the tax debt when you signed and filed the joint return. An exception is made if you signed the joint return under coercion or duress.
With this type of relief, you may receive a different allocation of tax debt for items not reported correctly on the joint tax return.
The qualification criteria is as follows:
- You are legally separated, divorced, or widowed from the spouse on the joint tax return
- You have been occupying a different household from the spouse with whom you filed jointly. This applies to the 12-month period that ends after the date you applied for relief
You will not qualify for Separation of Liability Relief if you fall under these categories:
- You were aware of the item that caused the tax understatement at the time you signed and filed the joint return
- You failed to apply for Separation of Liability Relief within the 2-year period following the date that the IRS initially attempted to collect the debt from you
- You were aware of the item(s) that caused the tax understatement when you signed and filed the joint return
3. Equitable Relief
In the case that you do not qualify for either Innocent Spouse Relief or Separation of Liability Relief, you may be able to qualify for Equitable Relief. This option allows you to be relieved from the tax debt when your current or former spouse was responsible for not reporting items properly on your joint return.
In addition, you may also qualify for Equitable Relief if the tax owed was not paid with the return even though the amount of reported tax was correct.
The IRS may consider the following factors when determining if you can be granted Equitable Relief. These factors include but are not limited to:
- Your current marital status
- You had reasonable belief that the taxes were going to be paid at the time you signed the joint return
- You had no reason to know about a tax understatement on the joint return when you signed it
- You are experiencing financial hardship and are not able to pay your basic living expenses
- Your divorce decree or payment agreement holds your spouse legally obligated to pay the tax debt
- To which person the debt is attributable
- You received significant benefit from understatements
- You had a physical or mental health condition on the date you signed the joint return or at the time the relief was requested
- Your history of income tax laws compliance after the taxable years of the relief request
- You experienced abuse during your marriage
What happens when you marry someone who owes taxes?
Each case is unique and must be reviewed by a tax debt attorney who is familiar with the process of liberating a non-responsible spouse from the tax debt. There are three options for relief for which you may qualify. Some considerations include whether you filed a joint or separate return, if you are widowed, are divorced, your health status at the time of filing, and other circumstances.
Can the IRS come after me for my spouse’s taxes?
Yes, in some cases, the IRS can hold you liable for your spouse’s tax returns. They cannot come after you if your spouse incurred the tax debt before you got married. All tax debt your spouse had before marrying you is 100% their responsibility. In this case, you don’t have to worry about your tax refund being withheld by the IRS. Regardless of your situation, the best first step is to consult an experienced tax debt attorney who can determine your options.
Is my wife liable for my tax debt?
Your wife can be held liable for your tax debt under certain circumstances. Each scenario is unique and must be carefully analyzed by an expert tax debt attorney. The specific tax status related to the debt of both individuals has to be determined to explore the options your wife has to protect herself financially from your tax debt.
What is the IRS innocent spouse rule?
The innocent spouse rule as defined by the IRS is one of the three options innocent spouses can request for relief including Separation of Innocent Spouse Relief, Liability Relief, and Equitable Relief. These types of relief requests liberate the innocent spouse from debt that may include understated taxes, interest, and penalties that result from reporting items incorrectly on a joint return with a current or former spouse.
Innocent spouses must prove they had no knowledge of understated taxes or any mistakes that were filed jointly. There are various factors that determine how the IRS responds to relief requests. Each case is unique and must be individually examined to follow the best course of action. The IRS has professionals available for guidance, however, hiring a tax debt attorney is the easiest way to start resolving tax debts involving a spouse.
Can the IRS hold me liable if my husband owes taxes?
Yes, it may be possible that the IRS can hold you liable if your husband owes taxes. This depends on specific circumstances related to your case. If you filed jointly but were unaware of tax errors made by your husband at the time of filing, you may fall under the innocent spouse rule that the IRS offers to spouses who shouldn’t be held responsible for the debt.
Your liability also depends on whether your husband acquired the tax debt before the marriage was official. If you think you may be liable for your husband’s tax debt, the first best step is to consult a tax debt attorney who has experience with married joint tax filing. There is no blanket solution as all cases are unique and require an individual assessment.
Should I file separately if my husband owes taxes?
Tax experts advise that it is best for you to file your taxes separately if your spouse owes back taxes until their debt is fully repaid. If you file jointly in this case, you may not receive your tax refund. There are cases when the IRS withholds your refund even though you filed separately. In that scenario, you may be able to qualify for innocent spouse relief to avoid your refund from being withheld.
Is a widow responsible for husband’s tax debt?
If the tax return that caused the debt was filed jointly while the deceased spouse was alive, the widow or widower may still be held responsible for the debt. However, the deceased’s estate may be used to pay the debt, which can negatively impact the surviving spouse. The surviving partner is not responsible for paying the deceased spouse’s back taxes if they filed separately, but the IRS may still use the estate to cover the debt.
Should you marry someone with debt?
First, you must consider if you live in a common-law state. Marrying someone with debt may affect you financially for years to come. However, there are legal documents that can be filed to protect yourself from your future spouse’s debt.