My spouse owes taxes. Am I liable?

November 02, 2020 by TaxAudit
Question Mark

As with most tax questions, knowing whether or not you are liable for back taxes owed by your spouse depends upon a variety of factors. Although this article will discuss various aspects of spouse liability, it’s best to consult with a tax professional who will look at your specific situation and help make this determination. TaxAudit offers a free consultation for those who find themselves in this predicament. This no obligation consultation is completely free; you will talk to a tax professional who will look at your situation and determine if anything can be done to help in your specific case.

How did you file your tax return?

Most married couples will generally pay less in income taxes when they file jointly, as opposed to filing separately. Thus, the filing status of Married Filing Jointly (MFJ) is claimed by the vast majority of married taxpayers, as it has little downside to it. But that doesn’t mean there are no downsides at all. Filing jointly does have some potential drawbacks that are rarely noticed or taken into account until a spouse is negatively impacted due to the situation or actions of the other spouse.

Joint and Several Liability

Inherent in the MFJ status are the provisions of joint and several liability – and this is one of the downsides to using this filing status. Taxpayers who file a joint return for a tax year are jointly and severally liable for any tax liability in regard to that tax year. What this means is that both spouses are responsible for any tax liabilities either directly stated on the return, or later if subsequent deficiencies are determined. This is true regardless of each spouse’s respective incomes individually, or whether the taxpayers resided in a community property state.

Joint and several liability solves a host of problems for the IRS in their efforts to collect taxes due. One can only imagine the problems that would arise if the IRS had to settle every dispute between spouses based on which of them should pay the taxes.

Breaking Joint and Several Liability

What can a spouse do to escape (find relief) from the negative impact of the joint and several liability provisions when the spouse feels that to apply these provisions would be unfair and that he or she is being impacted through no action(s) of his or her own? This is where Innocent Spouse Relief enters into the picture.

An Innocent Spouse is a spouse who is entitled to relief from joint and several liability. The purpose of the Innocent Spouse rules is to protect the innocent spouse from the dishonesty of the other spouse.

Taxes subject to the Innocent Spouse provisions are not limited to income tax, but also includes the alternative minimum tax (AMT), self-employment taxes (SE), additional taxes, penalties, and interest.

Here are Some Examples of Innocent Spouse Situations

Example 1: Marie and Quincy were married and both had incomes, with Marie working as a server at an upscale restaurant and Quincy working as a mechanic at a local car dealership. Marie collected a fair amount in cash tips which she did not report to her employer, the IRS, or Quincy. Instead, she deposited the receipts in a separate bank account, saving the money for the rainy day she planned on splitting up with poor Quincy. After the split, the couple was audited on their jointly filed return, and the IRS discovered the unreported income. Along with the deficiency, the IRS assessed a failure to pay and a fraud penalty, along with interest. A notice of deficiency was issued to both Marie and Quincy, and it was obvious the taxes were owed. However, Quincy believed he had done nothing wrong and was just caught up in Marie’s wrongdoing.

Example 2: Kerri had been living apart from her spouse for some time, both in a separate property state. They had filed MFS (Married Filing Separately) on their tax returns for the last few years. Kerri’s spouse had passed away unexpectedly, so on her spouse’s final return she decided to file MFJ, as it resulted in what appeared to be lower taxes overall. What she did not know was that her spouse had taken early pension withdrawals prior to his passing. She had been unable to take these distributions into account on their final joint return because she had not received the 1099-R’s, which had been mailed to a third-party address.

How to get Innocent Spouse Relief

Innocent Spouse Relief must be applied for. The spouse who applies for innocent spouse relief is the “requesting spouse” (aka “electing spouse”), and the other spouse is referred to as the “nonrequesting spouse.”

TaxAudit can help individuals in an Innocent Spouse situation properly apply for Innocent Spouse Relief. Getting the help you need starts with TaxAudit’s free consultation.

Do you owe money to the IRS or State?

Get Professional Help Now!

Recent Articles

Cash, IRS check, and Social Security Card
Taxpayers who are behind on their federal taxes may be surprised to know that their Social Security benefits are ripe for the picking by the IRS.
Definitely Worth It
Yes, TurboTax Audit Defense It is absolutely worth it. Those who have audit defense do not have to panic or make frantic calls upon receipt of IRS tax notices.
Doing Taxes
The most important thing about having audit defense, in my opinion, is peace of mind. Your tax professional will help you navigate the waters of a tax audit.
Net Operating Loss
If you are a small business owner, you may have heard about net operating losses. If you have one, it may create a reduction in your taxes in other years.
This blog does not provide legal, financial, accounting, or tax advice. The content on this blog is “as is” and carries no warranties. TaxAudit does not warrant or guarantee the accuracy, reliability, and completeness of the content of this blog. Content may become out of date as tax laws change. TaxAudit may, but has no obligation to monitor or respond to comments.