https://www.debt.com/wp-content/uploads/2017/07/Spouse-Tax-Debt.jpgGetting married is a beautiful commitment and it certainly means sharing your life with your spouse in so many ways than you planned. You may be joining two separate households, including your finances. If you did not discuss it before you gave your consent in marriage to your spouse, you may want to review those finances before you receive a surprise wedding package from the IRS.

If your spouse owes back taxes, even as far back as before you were married, and if you file a joint return, you will be take responsibilities for those back taxes too, unless you can file for spousal tax relief.

Based on your circumstances, you have so many alternatives available for tax relief from a spouse’s back taxes. Here, you will be provided with information that you can use to investigate which option will best work for you.

Where Did the Tax Debt Come From?

It isn’t a pleasant experience owing debt or being in arrears on taxes, in fact, they aren’t topics people look forward to discussing right before marriage. However, whether it is uncomfortable or not, you ought to know your marriage partner’s financial situation. Here are few facts you should find out:

  • Is he behind in child support payments?
  • Is she late paying her student debt?
  • Are there any state debts awaiting payment?
  • Is there a court judgment pending that remains unpaid?

The IRS can garnish wages and seize tax refunds to settle any of these debts. If you file jointly, you forfeit the joint refund. It won’t matter that you were not responsible for the debt from the start. From the perspective of the IRS, a joint return is fair game. Once each of you has signed, you are each jointly and individually liable for any tax, interest, or penalties incurred by the other.

The IRS also follows rules, some of which permit a spouse relief from a partner’s poor financial decisions.

Innocent Spouse Relief

Innocent Spouse Relief is one of the unusual methods of gaining full tax forgiveness from the IRS. You must show with evidence that your spouse (or a former spouse) incurred a tax debt without your awareness. The tax debt can come from a variety of circumstances. Some of which are: 

    • Your spouse or ex-spouse failed to report income.
    • Your spouse or ex-spouse underreported income.

 

  • Your spouse or ex-spouse claimed deductions or credits fraudulently.

Of course, it’s more difficult than simply saying you didn’t have an idea about these issues when you signed the joint tax return.

Firstly, complete IRS Form 8857 – Request for Innocent Spouse Relief. Keep in mind that if you falsify data on the form, you can be charged with perjury. Once you have filed, the IRS will contact your spouse or former spouse to acquire any relevant information they require. 

  • If the government discovers you had knowledge of the problem when you signed the joint return, you will not qualify for relief.
  • If the IRS finds no proof that you were knowledgeable, you can receive Innocent Spouse status, which makes you qualified for full and total forgiveness on all tax debt owed on that specific filing.

The relief comprises of not only taxes but interest and penalties as well. One caveat: Innocent Spouse Relief is only applicable to individual income or self-employed taxes. It does not include household employment taxes, individual shared responsibility payments, or business taxes and trust fund recovery penalties for employment taxes.

The good news is that the IRS will sum up the taxes you are responsible for, you don’t have to.

Separation of Liability

Separation of Liability is only obtainable for unpaid liabilities resulting from underpayment of taxes. You are allocating (separating) the understatement of tax (plus interest and penalties) on your joint return between you and your spouse (or ex-spouse). After that, you are only responsible for the tax allocated to you.

You can only file for separation of liability if you are no longer married to, or are legally separated from, the spouse with whom you filed jointly. Being widowed is added. Also, you cannot be part of the same household as the spouse you filed jointly with at any time in the 12 months before the date you file for separation of liability.

File IRS Form 8857 – Request for Innocent Spouse Relief. Separation of Liability is one area of the innocent spouse option.

Equitable Relief

If the IRS determines you are not eligible for Innocent Spouse Relief or separation of liability, you may be qualified for Equitable Relief. The government offers consideration for equitable relief only after denying innocent spouse relief or relief by separation of liability.

The difference between equitable relief and innocent spouse or separation of liability is that you may get the relief from an understatement or underpayment of tax of which you had knowledge. Equitable relief judgments puts into consideration all facts and circumstances to determine whether to offer relief. For instance, if you were the victim of domestic violence or abuse before you signed the joint return, and due to the abuse, did not challenge any items on the return for fear of revenge from your spouse.

Injured Spouse Relief

Injured Spouse Relief is different from Innocent Spouse Relief in that the IRS deems someone took money that was rightfully yours (injured you) as opposed to committing wrongdoing on a joint return of which you had no idea (you are innocent). The Treasury Department Offset Program can collect for a range of debt:

  • Past-due federal or state taxes
  • Late child support payments
  • Late alimony payments
  • Other federal debt, like overdue student loan payments

If the U.S. Treasury Department takes part or all of your joint refund through the Offset Program, money you anticipated to receive, and applies it to the debt owed by your spouse, you may qualify for Injured Spouse Relief to get back your share of the refund.

To apply, file IRS Form 8379 – Injured Spouse Allocation as soon as you know your refund will be affected by the qualifying debt of a spouse (or ex-spouse). You will need to file a form for each tax year where your refund was impacted, but you should note that you only have three years from the due date of the original return or two years from the date the balance was taken.

If you can provide clear evidence you had no knowledge of the debt liability, such as back taxes, created by your spouse or ex-spouse, you may be eligible for innocent spouse relief or relief by separation of liability. If you are not qualified for either, you may still be qualified for equitable relief, depending on your situation.

If you do not receive the refund you were expecting for the same reason, you may qualify for injured spouse relief.

If you are worried about the potential for issues with a joint return, you can always file separately and stay away the problem. On the other hand, your spouse can increase the number of exemptions to increase the amount of tax withheld from his or her wages to wrap the debt before you file jointly. Then you won’t need injured spouse relief.