When you get married, you and your spouse’s financial lives become intermingled. As a result, finding out that your spouse hasn’t paid her taxes can not only come as a shock but may also lead to a lot of anger and fear. You may wonder if you are responsible for what she owes and how that impacts your life. If your spouse has unpaid taxes. Here’s what you need to know.
You Might or Might Not Be Responsible for the Unpaid Taxes
Whether you are responsible for any back taxes depends on whether you were married during the tax year involved. If your spouse didn’t pay taxes in a year before you were married. Then you aren’t legally responsible. Additionally, if your refund was intercepted by the IRS to pay the debt. You can file for Injured Spouse relief, possibly getting part of your return back.
If your spouse didn’t pay while you were married. The situation is a bit more complicated. Your filing status may come into play, as well as whether you can reasonably show that you weren’t aware of your spouse’s failure to pay.
When Your Spouse Didn’t Pay While Married
For couples who opted for the married filing separately approach to their taxes, your refund is protected, and you typically won’t be seen as liable. Your tax documents were handled completely separately, so it is pretty easy to explain why you wouldn’t have had knowledge or direct involvement in their failure to pay.
Even if you filed jointly, you do have options. You’ll have to prove that you weren’t aware that they didn’t pay and that there wasn’t a reasonable way for you to know about the debt. Additionally, you’ll have to demonstrate that you didn’t benefit from the situation. Typically, this involves applying for Innocent Spouse relief.
Innocent Spouse Relief for Unpaid Taxes
Innocent Spouse relief is complicated. This is especially true since you have to show that you didn’t benefit from the fraud in a meaningful way. If the money your spouse kept was used in certain ways, like major improvements on a joint property, a gift given to you, or similar activities, you might not be able to avoid liability.
It’s also important to note that, if you live in a community property state, you might not be able to get your portion of the refund back. This can occur even if you had no idea about your spouse’s failure to pay and didn’t benefit from the situation. In community property states, any assets acquired during the marriage qualify as community property and are owned equally (a 50/50 split), and the rules change a bit. Here are the community property states:
- New Mexico
Consult a Tax Professional
If you live in one of those states, you may want to consult a tax professional to see how your options are impacted by community property rules. Usually, half or more of a shared refund can be used to pay for the tax debt, even if you weren’t directly involved or had no prior knowledge. However, the exact rules vary by state, hence why it’s wise to seek professional guidance.
In any case, you are now dealing with a complex situation that impacts your marriage. You’ll need to decide how to manage your finances going forward, including potentially dealing with back tax payments, penalties, and possible legal action. When in doubt, contact a tax professional and, possibly, a tax attorney. They can help you navigate the situation based on your unique circumstances.
Did you ever deal with a spouse with unpaid taxes? How did you handle it? Share your thoughts in the comments below.