Valentines Day Tax Advice

On Valentine’s Day, 1929, Al Capone ordered what has since become known as the Saint Valentine’s Day Massacre.

During tax time, there are many near-misses for massacres when spouses find out that their significant other has not been completely forthcoming regarding various debts – especially those regarding back taxes – or their income tax bracket.

Before you resort to something you will probably regret, let us share some ways you might avoid being held financially responsible for tax obligations of your spouse…

INJURED SPOUSE

Does your spouse have legally enforceable past-due debts, such as federal or state income tax, child or spousal support, or a federal nontax debt (student loans, etc.)?  If so, you may be an injured spouse if all or part of your overpayment of tax is expected to be applied to those debts.  You can call the US Treasury Department’s Financial Management Service (FMS) at 1-800-297-0517 to determine if there will be any offsets prior to filing your taxes.  This service will not provide information on federal tax debt.  If you are not legally responsible to pay for your spouse’s debts AND you had federal tax withholding OR you claimed a refundable tax credit, you can be considered an Injured Spouse.  (If you live in a community property state, you may be able to file Form 8379; you may only need to qualify for one of the previous items.) 

If you are certain that your refund will be used to offset your spouse’s debt(s), you can ask your preparer to file Injured Spouse Form 8379 with your return.  This form can be e-filed or mailed, but be aware that there will be a delay in processing your refund check; it will be 11-14 weeks from the time the IRS receives the form. 

Better news!  If your prior year’s refund was used to offset your spouse’s debt, you can file the same form for prior year’s taxes.  If you must file Form 8379 separately from your tax return, be certain to attach copies of all W2, W2G, or 1099 forms that were received.

MARRIED FILING SEPARATELY

Married Filing Joint (MFJ) is generally the best way for married people to file their returns. But sometimes, spouses may feel that Married Filing Separate (MFS) is better.  Most people choose to file MFS because they both want to only be responsible for their own tax.  They don’t want to be responsible for the joint liability of taxes owed.  Keep in mind, though, that generally filing MFS results in the payment of a higher combined federal tax than in a MFJ return.  In filing MFS, you increase your tax rate, lower exemptions and lose many credits.  If, however, your tax bracket doesn’t change, and you can’t take advantage of many exemptions and credits, Married Filing Separate may be the best way for you to file and avoid the joint tax liability.  Ask your PRO-TAX preparer to prepare your return both MFJ and MFS before filing, to determine the best situation for you and your spouse. 

So, now that you know you have options, go give your sweetie a big hug!  If that doesn’t solve your problem…come see us athttp://www.protax.com/locations/ PRO-TAX today.

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