Monday, March 09, 2009

Love in the Time of Taxes

Last week I wrote an article that has recently been published on CNBC’s “On The Money” Blog. For those of you who do not know, I have been a regular guest on the program for the past few months. You can find a snippet of the article I penned below, or the full article can be read here.

You’re in love! You’re getting married! Odds are taxes are the last thing on your mind. But, guess what? When you start filing joint tax returns, your spouse’s tax problems become YOUR tax problems. Having a few honest, frank discussions about your tax philosophy might just prevent some nasty arguments and tax problems down the road. What’s your strategy? Do you always get a big refund? Does your spouse always owe a good chunk come tax day? Get informed on tax laws and review your previous tax returns. Consult a tax professional if you feel out of your depth.

One of the smartest things is to make both partners responsible for the taxes. First, it is fairer than sticking one person with the entire chore. Second, being personally involved in your taxes makes both of you better stewards of your household’s financial situation. No matter how income is brought into your home, you are both ultimately responsible for paying taxes. Staying active in your tax situation helps keep you financially healthy.

In addition, never sign a return unless you know everything is true and properly stated. We all like to assume our partners are honest, but I can’t tell you how many people have no problem fibbing on their taxes. And little fibs can become huge tax problems. The IRS will hold you and your spouse both accountable for all taxes filed jointly even after a divorce. By signing the return you become complicit in any erroneous information. Best to challenge anything that doesn’t look right before filing.

But what can you do when it’s too late for prevention? What recourse do you have if you find the IRS is applying your tax refund to your spouse’s (or former spouse’s) liabilities?

Depending on your specific circumstances, you might be eligible for Injured Spouse Relief, or Innocent Spouse Relief.

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