If My Spouse Owes Back Taxes Am I Liable?

Filing taxes jointly can simplify things for married couples, but what happens when one spouse owes back taxes? Suddenly, tax season takes on a whole new level of stress.

You might be wondering, “Am I on the hook for my spouse’s tax debt?”. The answer, like many things in the tax world, is that it depends.

This post will break down the issue of spousal liability for back taxes, explaining when you might be responsible and what steps you can take to achieve a favorable outcome in your situation.

Am I Liable for My Spouse’s Back Taxes?

Unpaid taxes on the part of your marriage partner can leave you wondering, “Am I liable for my spouse’s back taxes?”.

The answer can vary based on how you filed your tax returns. When you file jointly, both spouses become equally responsible for the entire tax debt, including penalties and interest. This is known as joint and several liability. It means the IRS can come after you or your spouse, or both, to collect the outstanding taxes.

However, if you’ve always filed separately, you generally aren’t responsible for your spouse’s tax debt. In this case, each spouse is only liable for the taxes they owe on their own separate return.

There are some situations where you might be able to get relief even if you filed jointly. We’ll explore those options in a later section.

Tax Relief Options for Married Couples

So you’ve discovered that your spouse owes back taxes. While this news might be unsettling, there are steps you can take to resolve the situation together. This section will explore various tax relief options available to married couples facing back tax issues.

Innocent Spouse Relief

The Innocent Spouse Relief Program offers a way out for spouses who were unaware of their partner’s tax mistakes. If your spouse significantly understated your taxes through fraud or negligence, and you can prove your innocence, the IRS might relieve you of some or all of the tax debt.

The key here is proving you were unaware and couldn’t have reasonably known about the tax issues. Qualifying for innocent spouse relief can be tricky, so it’s highly recommended that you consult a tax professional.

Injured Spouse Claim

This may be an option if you filed jointly but your share of the tax refund was used to pay your spouse’s past-due debts. If these debts include child support, federal student loans, or certain federal taxes, you might be eligible to submit an injured spouse claim. By filing Form 8379 with your tax return, you can request that the IRS return your fair share of the refund.

Separation of Liability Relief

In some cases, the IRS offers relief through separation of liability. This program allows you to separate your tax obligation from your spouse’s.

Separation of liability has strict qualifying criteria. Generally, it’s only available if you can demonstrate financial hardship due to your spouse’s tax debt and you lived apart for the entire tax year (or the last 12 months before filing). Talk to an experienced tax professional to learn more about whether you might qualify for separation of liability relief.

Offer in Compromise

If you and your spouse owe back taxes but can’t afford to repay the full amount, you might be able to negotiate a settlement with the IRS through an offer in compromise.

This program allows you to offer a lump-sum payment to settle your tax debt. The IRS will consider your current financial situation, future earning potential, and the overall tax debt amount when evaluating your offer.

You’ll need to work with a tax professional to pursue an offer in compromise, as there are specific forms and procedures involved.

Equitable Relief

This is another option available to some spouses facing joint tax liability. Unlike innocent spouse relief, which has specific requirements, equitable relief affords more flexibility.

The IRS may grant equitable relief it considers it unfair to hold you responsible for your spouse’s tax debt due to extenuating circumstances beyond your control. These circumstances can include domestic abuse, abandonment, or a spouse who commingled funds and made it impossible for you to track their tax obligations.

IRS officials evaluate equitable relief on a case-by-case basis. A tax lawyer can help determine whether you’re eligible.

Keep in mind that this isn’t an exhaustive list. Speak with a tax lawyer to explore your options in greater detail.

Proactive Protection: Ways to Safeguard Yourself from Spousal Back Taxes

Discovering that your spouse owes back taxes can be stressful. Fortunately, there are steps you can take to protect yourself moving forward.

File Separately

If you haven’t already, consider filing your taxes separately going forward. Doing so will ensure that you’re only responsible for the taxes owed on your own income. While this might mean missing out on certain benefits of filing jointly, it can shield you from future tax liabilities your spouse might incur.

Communicate Openly

Talk to your spouse frankly and honestly about their tax situation and future filing plans. Understanding the root cause of the back taxes can help you avoid similar issues in the future.

Review Past Returns

If you filed jointly in the past, consider having a tax professional review your returns to make sure there weren’t any errors or omissions. Identifying these issues early can spare you a great deal of trouble later on.

Separate Your Finances

While this might not be feasible for everyone, consider decoupling your finances as much as possible, including maintaining separate bank accounts and credit cards. This creates a clearer picture of your individual financial situation and reduces the risk of being entangled in your spouse’s tax issues.

Build an Emergency Fund

An emergency fund can be beneficial for many reasons. Among others, having a financial safety net can help you weather unexpected tax challenges.

Consult a Tax Professional

If you need clarification about your tax obligations or the best course of action to address filing errors, your best bet is to meet with a qualified tax professional. They can provide personalized guidance and recommendations based on your specific situation.

Remember, proper planning and communication are key. By taking these prudent steps, you can minimize your risk of ending up on the hook for your spouse’s future tax mistakes.

What Are the Risks of Ignoring My Spouse’s Tax Debts?

Overlooking your spouse’s tax debts can have severe consequences. Here are some of the possible outcomes.

Joint Liability

If you file a joint tax return, you’re both jointly and severally liable for any taxes owed. By ignoring your spouse’s tax debts, you could be held responsible for the full amount owed, including penalties and interest.

Collections

The IRS has broad powers to collect unpaid taxes, including placing liens on your property, garnishing your wages, or levying your bank accounts. Avoiding your tax debts could result in the agency taking aggressive collection actions.

Credit Damage

Unpaid tax debts can negatively impact your credit score, making it difficult to qualify for loans, mortgages, or credit cards in the future. You could face such hindrances in addition to the other impacts described here.

Interest and Penalties

Unpaid tax debts accrue interest and penalties over time, increasing the total amount owed and making it harder to resolve the debt. The longer you wait to address your situation, the harder it will be to get out of it.

Legal Consequences

There are stiff legal repercussions for unpaid taxes, including civil penalties, fines, and even criminal charges in severe cases of tax evasion. The last thing you want is to be forced to pay for your mistake on two fronts.

Loss of Assets

In extreme cases, ignoring tax debts could lead to IRS agents seizing your assets or property to satisfy the debt.

Strain on the Marriage

From a personal standpoint, financial problems, including mounting tax debts, could cause friction in your marriage and lead to increased stress and tension between you and your spouse.

It’s critical to take a proactive approach to addressing tax obligations and seek assistance from a tax attorney to explore available relief options. By doing so, you can avoid many of these risks.

Contact Tax Relief Counsel for a Free Consultation

Ignoring your spouse’s tax debts can come back to haunt you in the form of joint liability, IRS collections, credit damage, and legal repercussions. For this reason, addressing your obligations and seeking assistance from a qualified tax relief attorney should be an urgent priority.

At Tax Relief Counsel, we help clients overcome their tax challenges, finding solutions that minimize their stress and the risk of further complications. Don’t hesitate to reach out for a free consultation to discuss your situation and explore your options for resolving your tax debt.