Am I Liable for My Spouse's Taxes?

[Chancester]

Here's a question -- I am married, living with my spouse, and planning to divorce. My husband is self-employed. In 2005, he grossly underpaid estimated taxes and in late 2006, I paid nearly all of our 2005 taxes (with my 2006 earnings). I have been checking with him all along this year, and he claimed he was paying our taxes (we have been filing jointly.) I have been asking him for a rundown of hte taxes since November.

It appears he has paid well under 5% of our income in estimated taxes to date. He has STILL not done the taxes. And he just informed me the taxes would be "my deal." Well, I spent all the money I earned last year bailing us out of the other tax debt. I earned about half of what he did.

My question is, should I just file married filing separately, endeavor to pay my taxes (which would have little or no deductions, as he paid most of the mortgage payments, etc.) -- and if I did this, would I be responsible for his tax debt? Is that a "marital debt" - so it would be deducted from our 'joint assets' anyway in the event of a divorce?

[Jade]

Here's a question -- I am married, living with my spouse, and planning to divorce. My husband is self-employed. In 2005, he grossly underpaid estimated taxes and in late 2006, I paid nearly all of our 2005 taxes (with my 2006 earnings). I have been checking with him all along this year, and he claimed he was paying our taxes (we have been filing jointly.) I have been asking him for a rundown of hte taxes since November.

It appears he has paid well under 5% of our income in estimated taxes to date. He has STILL not done the taxes. And he just informed me the taxes would be "my deal." Well, I spent all the money I earned last year bailing us out of the other tax debt. I earned about half of what he did.

My question is, should I just file married filing separately, endeavor to pay my taxes (which would have little or no deductions, as he paid most of the mortgage payments, etc.) -- and if I did this, would I be responsible for his tax debt? Is that a "marital debt" - so it would be deducted from our 'joint assets' anyway in the event of a divorce?

All the IRS is going to care about is getting paid.  You two are married, so, yes, you will be held responsible. 

However, your stbx is wrong in saying that the taxes are your deal.  When negotiating the property settlement, make sure to include this issue.  As he should be held responsible for his actions.  Has he put in writing the claim that he was paying the taxes?  Because if he did, he can be held liable for any penalties and interest (having it in writing is clear proof that he stated he was paying the taxes and would make it more than a he said, she said arguement).

I would check with a CPA who does taxes (I am not a CPA and not all CPAs work with taxes) and see about claiming at least half of the mortgage interest and property taxes on your return.  And if you have been separated for more than 6 months, I think that you will be able to file separately and at least claim the standard deduction and the exemptions for any children that you have as long as you have primary custody.  And you will want to file before he does, because he will in all likelihood claim any dependent exemptions even if he is not entitled to them (unless he has custody, that is.  Then he would be entitled to them).  And it will be a mess trying to straighten it out with the IRS. 

[junica]

Think about filing a innocent spouse thing for HIS tax debt.  I would file married filing separately unless your income is over the top.  In that case if marital funds paid the bills by all means take as many deductions as possible.

JMO

[Lee Borden]

Let's be precise about which years we're discussing. When your husband says taxes are "your deal," I think that's your cue to file married and separate for 2006 taxes. Any married partner can do that for any year, and you certainly seem to be in that group that would be better off to be doing that.

For prior years, for which I presume you already have filed a joint return with him, you do have liability, and you need to make sure your divorce agreement specifies that he is responsible for any deficiencies that may be assessed. HOWEVER, it is striking how useless these indemnity agreements are, because at that point Uncle Sam probably will be coming after you because it can't get the money out of your Ex. And if Uncle Sam with all his tools can't get the money out of him, there's a good chance you won't be either.

THEREFORE, talk to your attorney about reserving alimony pending the final settlement of all income tax matters for prior years. If you do this, and if your invocation of the Innocent Spouse provisions fails, and if you end up having to pay money to Uncle Sam, you would at least have an argument for the judge to order your Ex to pay you alimony to compensate you.