You generally aren’t responsible for tax debt incurred by your spouse before you were married. However, you could still run the risk that the IRS will seize your tax refund if you file jointly.
To avoid this situation, you have a few options.
If you choose to file separately, the IRS won’t offset your tax refund. Your spouse’s refund may be offset, but you’ll be safe from being held accountable for your spouse’s tax debt.
However, there can be downsides to filing separately. You may not qualify for certain tax benefits, resulting in a higher overall tax liability.
Injured Spouse Allocation
If you want to file jointly, but don’t want your refund to be seized by the IRS, you can file an injured spouse allocation. This informs the IRS that you aren’t responsible for your spouse’s tax debt and asks to have your joint refund allocated between the spouses.
The portion of the refund attributable to your tax items (income, deductions, etc.) won’t be seized. You can submit the Injured Spouse Allocation along with your tax return or after your tax refund has been filed.
Your spouse could also adjust their W-4 or estimated tax payments so that they don’t receive a large refund. However, if their withholding is reduced too much, they could owe a balance on their tax return and possibly face underpayment penalties.
You should also encourage your spouse to seek a resolution to their tax debt problems. If the IRS is seizing their tax refunds, then other enforced collection actions could be forthcoming, such as:
- The filing of a federal tax lien in the public records.
- Wage garnishments.
- Bank account levies.
- Passport revocation or denials.
These actions could also end up impacting you directly. For example, the IRS could levy the funds in a joint bank account if your spouse has the unrestricted right to access those funds.
If your spouse accumulates any tax debt while you are married and you file jointly, you will be equally responsible for the debt. In fact, the IRS can choose to come after you for 100% of any joint debt. In some cases, you may be able to request innocent spouse relief to avoid or reduce this liability.
The Gartzman Law Firm can help you with innocent spouse relief requests and other IRS tax problems. Use our contact form to request a consultation with an Atlanta tax resolution attorney.