What if the taxes due are not my fault? What if they are my ex’s tax problem?
It is very common for married couples to file a joint Income Tax return. A lot of people don’t understand that by signing a joint return you become “Jointly and Severally Liable”. This means that regardless of who earned the money that is taxable, both people on the return are 100% liable for the entire tax. As an example, let’s say Becky is self-employed and earns good money, but hasn’t paid any estimated taxes. Her husband, Bud, who is a wage earner and has plenty of withholding to offset his entire portion of the taxes due on the return, signs a joint return showing a large balance due solely because of the underpayment by Becky. Because it is a joint return both Bud and Becky are responsible for the entire tax balance due. Unfortunately, even though Bud paid all his taxes, the IRS can go after him for 100% of the balance due. Even worse for Bud, even though they aren’t really his taxes, he is easier for the IRS to collect from than Becky because he is a wage earner. All the IRS has to do is send a letter to his employer stating that the employer has to send Bud’s paycheck (most of it anyway) to the IRS. Because Becky is self-employed it’s much tougher for the IRS to track down her income streams, so the IRS has an easier target with the wage earner. This is a very common scenario.
Getting help with innocent spouse relief can be difficult. Unfortunately, this Joint and Several liability continues even after a divorce! Let’s say that Bud, after multiple domestic abuse situations decides to flee the relationship and gets a divorce. The bad news for Bud is that he is still on the hook for the entire liability and he is still the easier target for the IRS to collect from. The IRS doesn’t care about his divorce or personal problems.
The facts above are the general rules and can be very harmful in situations such as outlined above. However, there is hope in that the IRS created a set of rules for situations like this and calls them “Innocent Spouse Relief”. This allows, under certain circumstances, for the non-liable party to not have to pay the taxes of the spouse. Trust me, it’s not easy, but it can be a good solution if the circumstances are right.
There are myriad rules that apply depending on the facts and circumstances and there are even different types of “innocent spouse” relief that may apply. However, one thing that is certain is that timing is everything. This is a very time sensitive type of solution so as soon as you know you have a joint liability from a non-paying partner, it’s best to proceed very quickly!
If you want more innocent spouse relief information, call for a free consultation and see what options are best for your circumstances. 303-753-6040.