Am I innocent or liable for my partner’s tax debt? Should I file separately if my husband owes taxes? These are common questions among couples about filing taxes together or separately. While a marriage essentially brings two individuals together, joining their lives and responsibilities, due to the interwoven nature of financial obligations and duties, questions could arise regarding each spouse’s past tax liabilities. Let us learn about such liability and potential consequences in both situations.
Introduction
When filing their federal income tax returns, married couples can file jointly or separately. Many tax breaks are available to married couples who file jointly with the IRS.
Your spouse is responsible for any tax debt they had before you got married. Injured Spouse Relief and Innocent Spouse Relief can help if the IRS still attempts to collect from you.
Your spouse may incur tax debts during your marriage, and your liability will be determined based on your marital and tax debts.
Pros and Cons of Filing Separately
You can benefit from filing your tax return jointly with your spouse in many ways. Joint filers benefit from one of the most significant annual standard deductions when calculating taxable income.
Often, joint filers can earn a more significant income and still qualify for certain tax breaks because of higher income thresholds for certain taxes and deductions.
A couple that files separately, on the other hand, typically receives fewer tax benefits. Taxes may be higher if you file separate returns. However, individuals will only be liable for their tax debts and returns.
Benefits of Separate Filing
A couple who files separately experience many benefits, including:
- Choosing the married-filing-separately status provides financial protection since the IRS won’t apply your refund to your partner’s tax bill.
- When one spouse falls behind on child support payments, the IRS may seize the refund of the other spouse.
- When divorcing, couples may shun joint returns to avoid post-divorce IRS headaches, while spouses who disagree with their partners’ tax ethics may prefer to live separate tax lives.
Drawbacks of Separate Filing
- For married taxpayers who file separately in 2023, the Standard Deduction will be $13,850, compared to $27,700 for married taxpayers who file jointly.
- The deductions and credits mentioned above are often automatically disqualified if you file your tax return.
- The deduction for IRA contributions is also usually limited to separate filers.
- They also need help to take the deduction for student loan interest.
- Jointly filed returns have a $3,000 limit, whereas separate returns have a $1,500 limit.
If you need more clarification about the process, consult a tax professional or seek assistance like Beem provides online.
Understanding Community Property States
Divorcing couples are required by community property law to split their assets 50/50, but only assets acquired while residing in the state. It is impossible to consider or divide community property as property owned by either spouse before marriage or after a legal separation.
Only nine states are community property states. However, their law varies; some lean more towards community property, while others adhere to common law. By having the law decide how much of what goes to whom and who gets what, squabbling will be eased.
Assessing Individual Tax Situations
The United States allows a person to be a resident and a nonresident for tax purposes simultaneously. This usually happens when you enter or leave the United States. The government requires dual-status individuals to file tax returns.
A U.S. resident must establish their U.S. residency to take advantage of a tax treaty benefit from a foreign country. It is necessary to complete the Certification of U.S. Residency for Tax Treaty Purposes.
The IRS considers you a nonresident of the United States if you are not a U.S. citizen or if you meet one of two tests. When you meet the substantial presence or green card tests for the calendar year, you are considered a resident of the United States for tax purposes.
Consultation with Tax Professionals
A tax consultant or advisor assists individuals and organizations with their tax payments. Tax compliance, tax planning, and tax law are among their specialties. Individuals and businesses optimize their taxes long-term and short-term by employing the services of a tax consultant. Their goal is to minimize your and your partner’s tax liabilities throughout the year by assisting in the preparation of tax returns.
Conclusion
So, if you’re wondering, “Should I file separately if my husband owes taxes,” know that many factors must be considered when deciding whether married couples should file separately or jointly. Couples still determining which filing status to choose should compute their tax returns both ways to determine which will result in the biggest refund or lowest tax bill.
Consult your tax advisor if you still need to determine whether the married-filing-separately strategy suits you. There is always the possibility that you will miss out on some tax deductions. Check out Beem Tax Calculator to get a quick and accurate estimate of your federal and state tax refund.
FAQs
Am I responsible for my husband’s tax debt if we file separately?
No, you won’t be responsible if you file taxes separately.
Will the IRS take my refund if my spouse owes it?
Yes. Jointly filed tax returns may result in the IRS applying part of your refund to your spouse’s legally enforceable past-due debt. If you filed a joint return, you can use Form 8379: injured spouse allocation to recover your share of the joint refund.
