Are You Liable for Your Spouse’s Unpaid Taxes?
Often married couples file joint tax returns because it usually reduces their tax preparation expenses as well as their federal income taxes owed. A potential downside, however, is that, if one spouse has not declared their full income or falsely claimed too many deductions or credits on the couple’s joint tax return, both spouses are independently liable for the full taxes due. A second potential downside is that if the couple overpays their taxes, and one spouse has incurred debts before their marriage, the IRS may withhold some or all of the over payment.
In either of the above have happened to you, there are some steps you can take to rectify the situation. Our best advice: work with your tax accountant to determine your options.
If your spouse has under-reported their income or falsely claimed too many deductions or credits, the IRS and the state of California recognize three situations where you may be an “innocent spouse” and, therefore, not liable.
- You did not know that your spouse was under reporting their income, or falsely claiming too many deductions or credits – You must be able to establish that when you signed your joint tax return, you had no reason to know or suspect your spouse’s misstatement. You also need to show that it would be inequitable to hold you liable for the understatement of tax on your joint return.
- You are no longer with your spouse – You are now divorced, legally separated from, or no longer living with your spouse, so you are not liable for his or her taxes.
- It would be inequitable to hold you liable for the taxes owed – You can show that it would be unjust to hold you liable for your spouse’s taxes. Some of the things the IRS may consider are the following: you would suffer undue economic hardship, you were abused by your spouse, or you are in poor physical or mental health.
If your spouse has incurred debts before your marriage and you overpay your taxes, you can prevent the IRS from keeping your community property (half) share of your tax refund. As an “injured spouse,” you can complete IRS Form 8379 and attach it to every federal joint income tax return you file. Unfortunately, California does not allow you to do this, if you are due a state refund. Your spouse’s debts that may be considered in withholding your tax refund include such things as: unpaid federal or state tax, child or spousal support, and student loans received from a federal agency.
If you seek legal advice about your tax liability situation, please contact our office for a consultation.
Attorney Christina Sherman is a Marin County CA family law attorney and Certified Family Law Specialist, specializing in divorce, child custody and support, marital contracts and other family law issues.
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