Knowing if you have any liability for back taxes is so important, and it depends on a variety of factors too. In this guide, you will find out if you are liable and the steps you need to take to ensure the best result out of your situation.

newlyweds discussing tax debt

How was your Tax Return Filed?

A lot of married couples will pay less tax when they file jointly, rather than filing separately. This is why most married couples tend to claim the MFJ, or the Married Filing Jointly status. There are a lot of benefits to this, but that doesn’t mean that it is without its downsides. If you want to find out more then take a look below.

Joint and Several Liability

The one downside to the MFJ status is the fact that it is based joint and several liability. Taxpayers who happen to file jointly for a tax return are jointly responsible for what happens during that tax year. In other words, you are both responsible for any tax payments and if deficiencies are uncovered in the future, then you will both have to adopt responsibility for this. Joint liability solves a host of problems when it comes to collecting any tax that might be due. If the IRS had to deal with every dispute between spouses in regards to which person should pay their taxes, then you can only imagine how time-consuming this would be.

Married with tax debt? We can help

Actions that you Can Take

You can see some of the actions you can take in the table, with a full explanation listed below.

Status Liability Action
 

Tax Debt Before Marriage

None. Your spouse will be responsible for their tax debt before you were married. Apply for the “injured spouse” status if you have your refund interfered with.

 

 

Tax Debt During Marriage

Potential liability. You have to prove that you did not have any awareness of the debt during the marriage.

 

Apply for “innocent spouse” to see if you are eligible for forgiveness.

 

 

Tax Debt After Marriage

Potential liability. If the tax was filed jointly, you may have to cover part of the debt.

 

Apply for “separation of liability” so you can get partial liability relief.

 

Innocent Spouse

So, what can a spouse do to try and find, and then escape the debt that stems from the negative impacts of the joint liability provision? If a spouse feels as though the provision is unfair or if they feel as though they are being impacted through no fault of their own, then what options are available? This is where Innocent Spouse comes in. If you are an innocent spouse, then you will be entitled to relief from your liability. The general purpose of the Innocent Spouse rule is that it protects people from the dishonesty of others. Taxes that are subject to the Innocent Spouse Relief rule are not just limited to income tax. It is also possible to apply this rule to self-employment taxes and alternative minimum tax.

Injured Spouse

If you are an injured spouse, then you will have filed jointly with another spouse, but received no refund. It may be that the spouse owed debt and it is being chased by the IRS, with the refund being applied to the debt in question.

Separation Of Liability

Separation of liability offers some relief when it comes to the allocation of additional tax. If you are not living with them, or if you are legally separated then you may be eligible to have some of the debt removed. If you filed for the tax jointly, however, then you may be partially eligible.

A Tax Debt Example

The following is an example of what you can do if you believe that you are an innocent spouse in a situation where you may qualify for relief.

Janet and Tom were married and both individuals had their own income. Janet worked in a restaurant and Tom worked as a mechanic. Janet collected a lot of tips during her time at the restaurant, which she did not report to anyone. She deposited the receipts in another bank account which she intended to use, after breaking up with Tom. After the split, the couple were audited for their joint return and the IRS quickly found unreported earnings. The IRS applied a penalty with interest. Tom and Janet were given a warning, but as Tom did nothing wrong, and had no knowledge of the situation, it was only Janet who was billed. Tom had no liability in this situation, and therefore qualified for innocent spouse.

This is just one example, but it just goes to show how in relationships, things can happen without the other person’s knowledge, therefore giving them relief from any consequences.

The IRS and You

You now know that the IRS can try to seize your assets and, in some cases, your retirement funds if your spouse does not pay their back taxes. If you cannot pay your taxes, it is best to contact the tax debt relief professionals at Anthem Tax Services for the varying tax resolution services that may be available to you.

You can then see if you can agree to a payment plan with the IRS. This is best because eventually, the IRS will catch up with you, so it is better to be upfront with them from the beginning and avoid the legalities that can ensue when you do not pay your taxes.

 

Knowing if you have any liability for back taxes is so important, and it depends on a variety of factors too. In this guide, you will find out if you are liable and the steps you need to take to ensure the best result out of your situation.

How was your Tax Return Filed?

A lot of married couples will pay less tax when they file jointly, rather than filing separately. This is why most married couples tend to claim the MFJ, or the Married Filing Jointly status. There are a lot of benefits to this, but that doesn’t mean that it is without its downsides. If you want to find out more then take a look below.

Joint and Several Liability

The one downside to the MFJ status is the fact that it is based joint and several liability. Taxpayers who happen to file jointly for a tax return are jointly responsible for what happens during that tax year. In other words, you are both responsible for any tax payments and if deficiencies are uncovered in the future, then you will both have to adopt responsibility for this. Joint liability solves a host of problems when it comes to collecting any tax that might be due. If the IRS had to deal with every dispute between spouses in regards to which person should pay their taxes, then you can only imagine how time-consuming this would be.

Married with tax debt? We can help

Actions that you Can Take

You can see some of the actions you can take in the table, with a full explanation listed below.

Status Liability Action
 

Tax Debt Before Marriage

None. Your spouse will be responsible for their tax debt before you were married. Apply for the “injured spouse” status if you have your refund interfered with.

 

 

Tax Debt During Marriage

Potential liability. You have to prove that you did not have any awareness of the debt during the marriage.

 

Apply for “innocent spouse” to see if you are eligible for forgiveness.

 

 

Tax Debt After Marriage

Potential liability. If the tax was filed jointly, you may have to cover part of the debt.

 

Apply for “separation of liability” so you can get partial liability relief.

 

Innocent Spouse

So, what can a spouse do to try and find, and then escape the debt that stems from the negative impacts of the joint liability provision? If a spouse feels as though the provision is unfair or if they feel as though they are being impacted through no fault of their own, then what options are available? This is where Innocent Spouse comes in. If you are an innocent spouse, then you will be entitled to relief from your liability. The general purpose of the Innocent Spouse rule is that it protects people from the dishonesty of others. Taxes that are subject to the Innocent Spouse Relief rule are not just limited to income tax. It is also possible to apply this rule to self-employment taxes and alternative minimum tax.

Injured Spouse

If you are an injured spouse, then you will have filed jointly with another spouse, but received no refund. It may be that the spouse owed debt and it is being chased by the IRS, with the refund being applied to the debt in question.

Separation Of Liability

Separation of liability offers some relief when it comes to the allocation of additional tax. If you are not living with them, or if you are legally separated then you may be eligible to have some of the debt removed. If you filed for the tax jointly, however, then you may be partially eligible.

A Tax Debt Example

The following is an example of what you can do if you believe that you are an innocent spouse in a situation where you may qualify for relief.

Janet and Tom were married and both individuals had their own income. Janet worked in a restaurant and Tom worked as a mechanic. Janet collected a lot of tips during her time at the restaurant, which she did not report to anyone. She deposited the receipts in another bank account which she intended to use, after breaking up with Tom. After the split, the couple were audited for their joint return and the IRS quickly found unreported earnings. The IRS applied a penalty with interest. Tom and Janet were given a warning, but as Tom did nothing wrong, and had no knowledge of the situation, it was only Janet who was billed. Tom had no liability in this situation, and therefore qualified for innocent spouse.

This is just one example, but it just goes to show how in relationships, things can happen without the other person’s knowledge, therefore giving them relief from any consequences.

The IRS and You

You now know that the IRS can try to seize your assets and, in some cases, your retirement funds if your spouse does not pay their back taxes. If you cannot pay your taxes, it is best to contact the tax debt relief professionals at Anthem Tax Services for the varying tax resolution services that may be available to you.

You can then see if you can agree to a payment plan with the IRS. This is best because eventually, the IRS will catch up with you, so it is better to be upfront with them from the beginning and avoid the legalities that can ensue when you do not pay your taxes.