Greg Roberts

Greg Roberts

A recurring question that a tax professional will be asked is “Should my spouse and I file as married, filing separately instead of married, filing jointly.” 95% of the time it is preferable to file jointly due to the benefits that filing jointly provides. There is a potential downside, however, to filing jointly.

According to the Internal Revenue Service, “When filing jointly, both taxpayers are jointly and severally liable for the tax and any additions to tax, interest, or penalties that arise from the joint return even if they later divorce. Joint and several liability means that each taxpayer is legally responsible for the entire liability. Thus, both spouses on a married filing jointly return are generally held responsible for all the tax due even if one spouse earned all the income or claimed improper deductions or credits. This is also true even if a divorce decree states that a former spouse will be responsible for any amounts due on previously filed joint returns. In some cases, however, a spouse can get relief from being jointly and severally liable.”

In certain situations, a spouse (or former spouse) will be able to gain relief from the tax, interest and penalties on a joint return by requesting innocent spouse relief. There are other types of spousal relief available, but in this context we will confine our discussion to innocent spouse relief and, subsequently, with injured spouse relief.

A spouse may qualify for relief from the joint tax liability if:

1. There is an understatement of the tax liability due to your spouse omitting income or claiming bogus deductions or credits, and you were unaware or didn’t have any reason to be aware of the understatement of tax due.

2. There is an understatement of taxes, and you are divorced, separated or no longer living with your spouse.

3. After taking into consideration all the facts and circumstances, it would be unfair to hold you liable for the tax understatement.

Innocent spouses can claim relief from joint and several liability. In tax matters, this means that the IRS can recover from only one party and satisfy the obligation. The IRS form 8857 is the form used to request innocent spouse relief from joint and several liability.

Another form of spousal relief addresses the following: Often in a second marriage, one of the spouses, prior to the marriage, had incurred debt that is subject to offset by the IRS. Such debt would include a past due federal or state income tax liability; child or spousal support, state unemployment compensation debt, or other non-tax debt, such as a student loan.

This type of relief is known as injured spouse relief and is applicable when a tax refund is confiscated by the IRS for the reasons enumerated above. By completing form 8879, the injured spouse may be able to get back his/her share of the refund. This form can be filed with a tax return (or amended return) or it can be filed by itself, along with all W-2’s, w-2G’s or 1099’s that detail federal withholding. The injured spouse claim can apply for up to three years after the due date of a return.

If you believe that you would qualify for either type of spousal relief, it would behoove you to speak with a CPA, tax attorney or enrolled agent for help.

Greg Roberts is a certified financial planner with 35 years of financial and estate planning experience. Do you have a financial planning question for Greg? Email him at greg@lifesolutionsonline.net.