One Giant Mess: Joint accounts are notoriously difficult to navigate, even for established experts. That's because sometimes you pay together towards one debt, sometimes you don't. Couple that with community property state issues and we can make a formula: Marriage plus Tax Debt Equals Disaster! Here's how to solve the equation.
Same Household: It’s easier for the IRS to handle cases where the couple shares a household- they both owe the debt and they will both have to participate in the solution. The IRS will need to know the expenses for everyone in the household.
Even if the couple if Married Filing Separate, if they both live in the same household, they both n need to participate in the solution.
Different Household: A joint account with a pending divorce makes things more difficult. This involves two separate payments; it’s not simply one arrangement.
The minute the couple splits and starts maintaining two households, it’s payment plans, although the payments will both be going towards the same debt. Their payment amounts will be based on their respective financial statements.
Community Property States
You can marry the tax debt, be careful who you marry if you live in a Community Property State. If they owe, you owe. They can in fact be levied, “based on community property laws by the state.” Basically, as long as you are legally married the IRS can go after your wages for your spouse's debt.
The Community Property States List: Married persons are considered to own their property, assets, and income jointly. If married people decide to file separate tax returns, they must follow their state rules for community income:
No Innocent Spouse Relief: They cannot file for innocent spouse relief if you live in a Community Property State, the spouse is guilty by way of the state laws.
Final Tip: The IRS will need to speak with both individuals, pending legal separation or not. Understanding this early on is crucial. For divorced couples, the legal dispute keeps the IRS from disclosing information. Here's a first-hand description from someone who e-mailed me just the other day:
"With the debt they treat us as though we are still married, but when I call to find out what is going on I only get half the story because then they treat us like we are divorced. "
The moral of the story? Roll up your sleeves are prepare for a battle, and if you can't handle it on your own, consider looking to a professional for help.
Labels: Innocent Spouse, Marriage and Taxes