I’ve broken down the process to successful IRS debt resolution into three steps. Each step helps the client understand his or her financial picture, including what is owed to the IRS, what he or she can pay, and what the options are for ending a tax problem.
If your spouse is in debt to the IRS and his or her wages are garnished because of it, chances are you are liable for the debt as well.
Not only does a spouse’s wage garnishment mean lost income, if he or she loses his or her job, that wage garnishment becomes your responsibility. California is a community property state, which means that any debt incurred during a marriage is considered a communal debt and both spouses are liable.
The IRS may seek to recoup its debt by taking money from any joint accounts you share with your spouse, including retirement and savings accounts. This is called a levy. They may also go after a bank account held in your name only.
But say your spouse entered the marriage with a wage garnishment. Perhaps he or she was paying off years of unpaid taxes that racked up long before you met. Are you still liable?
The answer is no, not if you live in a community property state. Debt incurred before the marriage is not considered joint debt. However, chances are that debt has continued to incur interest–additional debt for which you are now responsible.
Tax resolution specialists can help you keep your money by showing the IRS that certain accounts are not community property.
How about if you’re separated or recently divorced, and your spouse fails to pay taxes. Are you liable?
The simple answer is: yes you are liable if you filed a joint return for the tax year that went unpaid. However, if you filed individual returns, you are not liable for your spouse’s tax debt.
In the case of a joint return, if your divorce settlement stipulates you are not liable, the state and federal government will still see you as responsible. That’s why, if your spouse owes back taxes, it’s wise to file as “married, filing separately.”
The IRS allows you to claim single status if you have a legal separation or if you have lived apart from your spouse for six months out of the last year. If your divorce is finalized by the last day of the year, you are required to file as single, or “head of household.”
To learn more about how to solve tax debt, whether yours or your spouse’s, book a free consultation with me.
I had a client recently who had not filed a tax return in eighteen years. He also did not have a checking account for 20 years. His was a life lived “underground.” But then he took a W2 job and the IRS caught up with him.