What Happens If Your Spouse Owes Taxes?
When your spouse owes taxes to the IRS or other state taxing authorities, you may be equally liable for that tax’s repayment depending on when your spouse incurred the unpaid tax, your tax return filing status, and other factors. Our guide will help you understand the consequences of your spouse’s unpaid tax.
Marriage often brings certain tax benefits such as increased income thresholds for different tax rate brackets along with deduction and credit opportunities. However, marriage can also present risks as a taxpayer if you do not have strong knowledge of your income, finances, and tax obligations. You may be unaware of inaccurate tax reporting and the unpaid tax that will likely follow. Know your rights as a married taxpayer and how you can protect yourself from the unpaid taxes of your spouse.
Your Tax Filing Status Will Affect Your Liability for a Spouse’s Unpaid Tax
As a married taxpayer, you have two filing status options when you prepare your federal income tax return and submit it to the Internal Revenue Service (IRS). You and your spouse can file as either married filing jointly or married filing separately. When signing your tax returns, you and your spouse generally certify the accuracy of the reporting and take responsibility for underpayment of tax and any resulting penalties.
Spouses who submit married filing jointly returns will assume this responsibility for both spouses’ tax obligations. In contrast, married filing separately taxpayers only certify their individual income and tax liability.
Are You Liable for Tax Liabilities a Spouse Accumulates During Marriage?
You are generally liable for the tax liabilities that a spouse accumulates during marriage when you submit your tax returns under a married filing joint status. The IRS views you and your spouse as a single taxable entity and will seek to collect owed tax amounts from either party, regardless of who earned the income resulting in tax liability.
What the IRS Can Do to Collect Unpaid Taxes Against Married Taxpayers
If you fail to voluntarily pay owed back taxes, the IRS may take certain actions against you or your spouse to collect the owed tax:
- Withhold or offset your tax refunds in future years
- File a federal tax lien notice on your property
- Serve a notice of levy to seize your property
The IRS can attempt to collect unpaid tax from any of your personal or real property. This includes property such as bank accounts, investment accounts, wage garnishment, and other personal belongings of value.
When Can Innocent Spouse Relief Be Used If I Am Liable?
In some situations, the IRS will provide innocent spouse relief to those who unknowingly submit tax returns when their spouse underreported taxable income or other necessary tax information. To qualify for innocent spouse relief, you must meet certain eligibility criteria:
- You filed a joint return that understated your tax obligations because of your spouse’s erroneous item (i.e., a misstated calculation of income, deductions, credits, or property basis).
- You can prove that when you signed the joint return, you either didn’t know (or didn’t have a reason to know) that your spouse understated their taxes.
- Holding you accountable for your spouse’s understated tax would be unfair under the circumstances.
For the element of fairness, the IRS will consider whether you received any financial or other benefits more than typical support. To maintain eligibility for innocent spouse relief, you must initiate the request within two years from when the IRS started its collection actions against you.
Other Types of Relief If Your Spouse Has Unpaid Taxes
In addition to innocent spouse relief, you may have the opportunity to avoid your spouse’s unpaid taxes through separation of liability relief or equitable relief. Separation of liability relief is when you distinguish your tax liability from your spouse on the joint return as though you had filed separately. To qualify for separation of liability relief, you must meet one of the following requirements:
- Be divorced or separated from your spouse
- Be widowed
- Not have been a member of the household as the spouse you filed the joint return with in the 12 months ending on the date you file for relief
Separation of liability relief also requires that you did not have actual knowledge of understatement of tax (unless you can show you were under duress at the time). Equitable relief is a final method of relief the IRS offers to spouses in situations where it would be unfair to hold them liable for their partner’s understatement of tax. In cases of equitable relief, the IRS will consider factors such as abuse or a lack of financial control when deciding.
Outside of relief options from the IRS, you may also have options for avoiding your spouse’s tax liability if you live in a community property state such as:
- New Mexico
To benefit from your state’s community property laws, you will usually have to file your tax returns as married filing separately.
Married Filing Separately and Spouse Owes Back Taxes
When you submit tax returns as married filing separately, you are usually only liable for the taxes owed on your income. That means the IRS will have difficulty going after your assets to collect the unpaid taxes of your spouse. Even though you won’t technically be liable for your spouse’s unpaid tax, you may find your joint assets (e.g., joint bank accounts) with your spouse in jeopardy because of the IRS’s efforts to collect the owed tax. Additionally, gifted property from your spouse could also find itself the target of tax liens or levy if the transfer was made to avoid payment of unpaid tax.
Can You Be Liable for a Spouse’s Premarital Taxes?
You won’t generally be liable for a spouse’s underpayment of taxes for years before the marriage. As mentioned above, your liability for a spouse’s unpaid tax is most concrete in situations where you filed jointly. Although, you may have to deal with the consequences of your spouse’s unpaid tax during the marriage and it may impact any joint assets you have – similar to situations where you submit as married filing separately. The IRS has 10 years from the date of assessment to collect unpaid tax, which means spouses could have fallout from their partner’s tax liability well before they ever married.
When Can the IRS Garnish My Spouse’s Wages for Other Spouse's Tax Liability?
It is not uncommon for unpaid taxes to be a source of conflict within a marriage that can lead to separation or divorce. You may find yourself currently married or contemplating marriage to someone whose former spouse has unpaid tax. This may leave you wondering if the IRS will be able to garnish your spouse’s wages for the owed taxes of their ex. The short answer is the IRS will be able to garnish their wages for unpaid taxes arising out of years they filed joint return (unless some form of relief is available). This possibility will exist for 10 years from the date of assessment.
What Can You Do to Protect Yourself When Your Spouse Owes Taxes?
When you become aware of your spouse’s unpaid tax or receive notice from the IRS, you should consider a few different actions. The first step may be to consult with a tax attorney to get a better sense of the validity of the unpaid tax claims and your options for possible innocent spouse relief or other pardons. You may need to take actions to separate your finances such as opening your own bank account and diverting any W-2 wages or other income to it instead of joint accounts. You will also likely need to cease filing joint returns with your spouse.
Find a Local Tax Professional Near You with TaxCure
At TaxCure, we have a large network of tax attorneys and other tax professionals who provide representation and advice to spouses dealing with the aftermath of their partner’s unpaid taxes from underreporting. If you need help obtaining spousal relief or received notice from the IRS, find professionals nearest you to get the assistance you deserve. You can start your search here by viewing local professionals with experience with spousal tax problems.