Incurring debt before marriage: A wise course of action is to abstain from it
Hey there! I'm here to help you navigate the tricky territory of tax debt, especially when it comes to marriage. Let's dive in.
Married Life and Tax Liabilities
When you're married, filing joint tax returns makes both spouses accountable for taxes, penalties, and interest, even after a divorce. Unfiled returns can lead to some serious issues, like IRS liens on jointly owned properties. But don't worry, liens are usually a last resort for smaller debts.
One thing to keep in mind is that divorce decrees can't shield you from your shared financial obligations with your spouse. The IRS doesn't recognize these decrees, so you're still liable for any joint debts incurred during marriage.
drafting your tax strategy
Marital Status Matters
Choosing to file "Married Filing Separately" can minimize your liability to just your own tax bill, with a few exceptions in community property states. However, there are drawbacks, like losing access to credits like the Earned Income Tax Credit if you're not separated for at least six months.
IRS Relief Options
There are several relief options available from the IRS:
- Innocent Spouse Relief: If you can prove that your spouse was solely responsible for hidden income, deductions, and inaccuracies on your tax returns, you may be relieved of liability.
- Separation of Liability Relief: Allocates the tax debt proportionally after a divorce if you meet the Innocent Spouse Relief criteria.
- Equitable Relief: Applies when taxes were reported accurately, but not paid on time, and stem from your spouse's actions.
Remember, these relief options must be applied within the stipulated time frames set by the IRS.
Post-Divorce Considerations
After a divorce, the IRS can still come after you for collections, targeting your wages or bank accounts regardless of the divorce settlement. Payment plans or offers in compromise might help manage the debt if relief isn't granted. If you live in a community property state, you could still be held liable for marital debts, even when you file separately.
Proactive Steps
The best course of action is to address any unfiled returns promptly. Consult a tax attorney to evaluate your eligibility for relief and consider filing separately if there's any mistrust.
Stay tuned for more insights on managing your tax debt and protecting your assets!
Isabella, the expert financial advisor, specializes in helping individuals navigate complex financial scenarios. Send your questions to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or through the "Contact" form on askisabella.com.
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[Enrichment Data - Summary]
In a marriage, unfiled tax returns can lead to significant issues.Joint tax returns make both spouses liable, and unfiled returns risk IRS liens on jointly owned property.Divorce decrees are not binding on the IRS, so you remain liable for joint debts incurred during marriage.Choosing to file "Married Filing Separately" can minimize liability but may impact Access to certain credits. There are multiple IRS relief options available, like Innocent Spouse Relief, Separation of Liability Relief, and Equitable Relief, all with specific criteria that must be met. Post-divorce, the IRS can still collect from you, even if the divorce settlement states otherwise. Community property states could hold you liable for marital debts, even when you file separately. To avoid complications, prompt action on unfiled returns and consulting a tax attorney is recommended.
- In a marriage, filing joint tax returns can make both spouses accountable for taxes, penalties, and interest, even after a divorce, and unfiled returns can lead to serious issues like IRS liens on jointly owned properties.
- Divorce decrees do not shield individuals from shared financial obligations with their spouse, as the IRS does not recognize these decrees, so you're still liable for any joint debts incurred during marriage.
- Choosing to file "Married Filing Separately" can minimize your liability to just your own tax bill, but there are drawbacks such as the loss of access to credits like the Earned Income Tax Credit if you're not separated for at least six months.
- The IRS offers relief options, like Innocent Spouse Relief, Separation of Liability Relief, and Equitable Relief, that individuals can apply for if they meet the criteria to alleviate liability.
- After a divorce, the IRS can still collect from you for unpaid joint debts, and if you live in a community property state, you could still be held liable for marital debts, even when you file separately.
