There’s nothing worse than having to pay for your spouse’s tax mistakes. Unfortunately, you can be held liable for your partner’s debt if you filed jointly. In this case, it’s important to access tax resolution services because you might be eligible for Innocent Spouse Relief or a similar program. Keep reading to find out more about Louisiana tax resolution for married couples.
LOUISIANA TAX RESOLUTION: CAN I BE HELD LIABLE FOR MY SPOUSE’S TAX DEBT?
Married people are sometimes held liable for their spouse’s tax debt, but it depends on the situation. Couples can either file their taxes jointly or separately. If they’ve filed jointly, both people are responsible for paying their taxes. If they file separately, each person is responsible for their own taxes, and the other spouse is not liable.
Many people choose to file their taxes jointly because there are some financial advantages. Couples are eligible for several tax breaks like Earned Income Tax Credit and American Opportunity Tax Credit. They also benefit from higher income thresholds for certain deductions. As a result, people who file jointly often owe the IRS less money or receive a larger refund.
However, problems can arise because both people are liable for the entire balance, not just their own portion. This means that both people are considered in debt if one spouse isn’t able to pay. Assets from both partners can have a lien placed on them, which increases the couple’s risk levels.
The second option is to prepare two tax returns and file taxes separately. This reduces the income thresholds for certain deductions and the number of tax breaks, but it can also provide a layer of security for both spouses because neither is liable for the other person’s tax debt. If one person fails to pay the IRS, the other’s assets aren’t at risk.
It’s worth noting that couples can choose to file differently in different years. If you’ve filed jointly in the past and have recently switched to filing separately, you’re still responsible for your spouse’s tax debt from previous years.
The Timing of the Marriage
Another factor to consider is when the debt was accrued. If one partner already had debt before getting married, the other person isn’t liable. However, the IRS sometimes intercepts tax returns from joint filings to pay off one spouse’s old tax debt. In this case, the other spouse can file for Injured Spouse Status and receive the tax return directly.
Both people are responsible for tax debt accrued during the marriage, unless they filed separately. If they get divorced, they both may be liable for back taxes, depending on the timing of the return. Sometimes, one spouse is eligible for Separation of Liability Relief. Once the couple is divorced, the spouses are no longer responsible for each other’s tax debts.
SHOULD WE FILE JOINTLY OR SEPARATELY?
Most people benefit from filing jointly because they gain access to a lower tax rate and more credits and deductions. Filing jointly can be especially important for high earners because the Roth IRA income cutoff is much higher for married couples. Despite this, filing jointly isn’t a good idea for everyone. If both spouses are earning roughly the same, filing separately could be advantageous.
Similarly, people whose student loan payments are determined by their income, those who have hefty medical bills, and those who are worried about their spouse’s financial situation should file separately. It’s always best to speak to a tax resolution services provider before making a decision, especially in challenging or complex cases.
WHAT IS INNOCENT SPOUSE RELIEF?
Innocent Spouse Relief is one of the IRS’s forgiveness programs, designed to help people who are having trouble paying their taxes. You can benefit from this option if you filed a joint tax return with your spouse and later discovered that there were issues such as overstated expenses or underreported income. If you didn’t know about these problems when you filed your return, you don’t typically have to pay for your spouse’s mistakes.
To qualify for Innocent Spouse Relief, you must have filed a joint return without being aware of the tax issues. Although this can be hard to prove, you have a good chance of gaining access to Innocent Spouse Relief if you had no reason to be suspicious at the time of filing, and you never asked your spouse about the questionable items.
How Do I Access Innocent Spouse Relief?
You have to request relief within two years of receiving notice of an audit or finding out about the tax debt. Start by filling out Form 8857. Once you’ve submitted this to the IRS, you will receive information about the next steps. The IRS will contact your spouse to find out whether they want to participate in the request. It might take up to six months for a decision to be made.
If your request has been granted, you no longer have to pay the outstanding amount. Because you have to provide the IRS with a lot of information, it’s important that you seek professional guidance during the application process. An experienced Louisiana tax resolution specialist can help you determine whether you’re eligible, compile the necessary documents, and negotiate with the IRS.
WHAT OTHER TAX RESOLUTION SERVICES ARE THERE IF I DON’T QUALIFY?
You can get help even if you’re not a suitable candidate for Innocent Spouse Relief. Speak to your tax resolution expert about your options. You might be eligible for penalty abatement. This means that you still have to pay the outstanding debt, but any fees and penalties are removed from your account.
Another great option is the Installment Agreement. This allows you to pay off your debt over a longer period. If you have a small amount of debt, you can set up your Installment Agreement online. Otherwise, you have to contact the IRS directly. Always speak to a professional before setting up an IA. Depending on your situation, there might be cheaper options, such as putting your debt on a zero-interest credit card or taking out a personal loan.
What If I Can’t Pay My Debts?
Sometimes, people come to see us because they can’t pay off their debts due to a difficult financial situation. They might have lost their jobs, had to stop working to take care of a family member, or become ill unexpectedly. There are two forgiveness options for people who don’t believe they’ll be able to meet their obligations. The first one is Currently Not Collectible status.
This stops all collection activities until the taxpayer’s financial situation has improved. However, interest still accrues, and the debt doesn’t go away. The Offer in Compromise is suitable for people who can pay off some debt, but not the full amount. Although the OIC is one of the best options because it permanently reduces the amount of debt, it’s hard to access. Speak to your Louisiana tax resolution specialist before submitting your offer.
Sometimes, married people are held liable for their spouses’ tax debts. However, there are several IRS forgiveness options for people struggling with tax debt accrued by their partners. Reach out to us at Geaux Tax Resolution to schedule an appointment and find out more about our tax resolution services. We have several decades of experience, so we’ll be able to help you with your situation, no matter how complex it is.