“Joint Liability” - The IRS’s favorite wedding gift

You meet, fall in love, and get married. Ah … young love! You are now a couple. You socialize with other couples. You do stuff together. Go the movies together. Go to friends’ parties together. Go the gym together. Ride your bikes together. Bliss. Then that very first April 15th arrives after your Nuptials. Tax time!! Before you were married, you were SINGLE! As you always did when you were SINGLE, on your IRS Form 1040 U. S. Individual Tax Return, you checked the box for “Single.” Easy. Smooth. No decision required. Single is Single. But now you are MARRIED. Now you (and your beloved) will be required to choose between two boxes: (1) Married filing jointly (even if only one had income), or (2) Married filing separately. Many CPA’s, accountants and tax return preparers advise their married clients to check Married Filing Jointly because there are some tax benefits that will result in lower overall taxes. And don’t forget – you are IN LOVE! You and your beloved do everything TOGETHER! Now that you are married, of course you want to do things JOINTLY … not SEPARATELY! SEPERATELY sounds so lonely. One of the reasons you got married is that you were tired of being lonely! Where’s the love in SEPARATELY? Let me tell you.

Where a joint return is signed by both spouses, the spouses are jointly and severally liable for the tax due. This means each assumes liability not only for the tax shown to be due on the return but for the full tax liability, including any interest and penalties.

So, for example, let’s say that Fred (Husband) and Wilma (Wife) file a joint return that omits income reported on a Form 1099 for consulting work performed by Fred. The IRS subsequently assesses a deficiency after performing an information reporting match against the return. Wilma is jointly and severally liable for the deficiency, penalties, and interest, even though the unreported income was attributable to Fred! Joint liability ladies and gentlemen is the “price” you pay for the “tax benefit” you receive when you file Married Filing Jointly.

In general, I advise my clients to file Married Filing Separately. Where IRS tax debt is concerned, I love the free and lawful asset protection provided by the Married Filing Separately option. If the tax debts always seem to follow Spouse A, both Spouse A and Spouse B sleep better at night knowing that Spouse B is not and will not be JOINTLY liable for Spouse A’s tax debt. It may not sound romantic to file Married Filing Separately, but it just might save your romance! Trust me. As a tax attorney, I have consulted with my share of Fred and Wilma’s. By the time they are talking to me, there is absolutely nothing romantic about the choice to file Married Filing Jointly. And here’s the good news: Even if you file Married Filing Separately, you can still be in love! You can still be a couple. You can still socialize with other couples. You can still do stuff together. You can still go the movies together. You can still go to friends’ parties together. You can still go the gym together. You can still ride your bikes together.

I have checked the Internal Revenue Code and found no provision that says that if you file Married Filing Separately you cannot be in love with your spouse. Bliss!