After “I Do” : Handling Tax Debt in Marriage.

More than just having someone “to have and to hold”, marriage can make handling your taxes easier and provide unique benefits. You have the option of streamlining the filing process by filing jointly and merging two annual tax incomes into one. However, there are certain issues to consider if you’re preparing to file a joint return with your spouse.

What You Report

First and foremost, a joint tax return means you assume responsibility for your partner’s portion of the return. If, for example, your spouse forgets to include income and the IRS assesses a liability, you are both equally responsible for resolving the debt. This principle applies to any return you file jointly.

Absence of Deniability

In many instances, couples who file jointly do not equally share the actual filing task. In other words, it’s not uncommon for one spouse to assume the tax-filing duties, using his or her partner’s information to simply complete the tax return. Regardless of who files taxes, both spouses are responsible for what’s reported on the return. In the event that your spouse hands in a tax return that’s riddled with errors, you will be held liable for any ensuing IRS issues.

Potential Consequences

Assuming that there is an identified problem with your jointly filed tax return, both you and your spouse will be subject to collection activities. The full range of IRS efforts to collect tax debt can vary depending on the amount due and the nature of the tax issue.  However, you both will equally bear the weight of any IRS action. If a joint tax debt is unresolved, the IRS can garnish wages from you or your spouse, or levy either of your bank accounts.

The Question of Divorce

Should you and your partner decide to divorce, you will not be exempt from any problem stemming from a previously-filed joint tax return. Let’s assume that you have been divorced for the last ten months and the IRS assesses a tax debt from two years ago.  Both you and your former partner will continue to share the burden of any and all resulting collection efforts resulting from a previously filed joint tax return.

Innocent Spouse

While both you and your spouse are initially liable for any tax debt, the IRS acknowledges that there are instances when only one of you should truly be held responsible. The Innocent Spouse Program allows for an exception regarding collection efforts. Specifically, if you had no knowledge of (and no reason to know about) a reporting issue which led to a delinquent tax balance, you may be absolved of any liability.

In this scenario, you may make a formal request to the IRS to essentially be relieved from the debt, leaving your partner solely responsible for the balance. You will be asked to provide information to validate your claim, which will then be reviewed by the IRS. As an example: if your spouse was solely handling your joint return and claiming phantom dependents; if you can verify that you were not aware this was happening, the IRS may approve your innocent spouse request.

Professional Consideration

If an issue occurs from a jointly-filed tax return, consider consulting with a licensed tax professional. Such an individual can also be instrumental in building your case for an innocent spouse request, if necessary. This approach can ensure that no important detail is overlooked in your request, and the IRS is given a comprehensive account of your situation. Contact RMS Tax Consulting at (520) 448-3531 and speak with Enrolled Agent Richard Schickel for a free consultation.

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