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Should I file separately if I just found out spouse didn't have any federal tax withholdings? Or am I liable for the debt either way?

Headed into divorce but not yet divorced nor legally separated. Just found out that husband's employer did not withhold ANY federal income taxes from his paychecks. I was unable to see his pay stubs and he didn't bother to look at them so he never noticed until *I* requested a pay stub (this year, for divorce purposes), and that's when I saw no federal taxes have been withheld this year. I asked why and asked him to check his stubs from last year (2022). Discovered no fed. taxes were withheld since he started the job last year. His W-4 is correct, so this was an employer error and I will report them. HOWEVER, he never bothered to check his pay stubs and gave me no reason to believe he was underpaying, especially considering both of us have always had *extra* withheld to ensure we don't owe at the end of the year (until this job. I had extra withheld in 2022, but his employer still withheld $0 federal.) I had no idea his payroll deposits to our bank account were "over" each week by the amount of taxes he should've paid and continued to use the full amount to pay our mortgage, utilities, child-related expenses, etc. His automatic payroll deposits were no higher than his previous job, so I didn't suspect anything was off. The problem? He significantly underpaid and I overpaid. I have not yet filed and am debating filing separately. Will the IRS still come after ME for debt that HE should have discovered and corrected within a few weeks of working there? (Shouldn't everyone go over their pay stubs when starting a new job?) Filing jointly, we'd get $100 refund. If I file separately, split mortgage interest, property taxes, and real estate taxes in half, and allow him to claim 2 of 5 kids (he's never home, has been cheating on me with 5+ women which was discovered by our 11yo child, is abusive but no proof of physical abuse because I was scared to report, is a compulsive liar, has major depressive disorder, was fired from that job mid-March, and is just an overall mess so I feel this is generous of me considering he does NOTHING for our home and just make it worse with holes in the walls and shoddy, 1/2-complete, DIY projects), he'd owe $6282 and I'd get a refund of $6202. We DO NOT live in a community property state. Advice PLEASE?? Am I liable for these taxes because they went into a joint account and were spent on our family's bills when I didn't even know it was money owed to the IRS? I don't think I'd qualify for Innocent Spouse Relief since I now know about the lack of taxes withheld and haven't filed or signed a joint return. Since I know about the error prior to filing, am I protected if I file separately? Will the IRS come after joint assets such as our home which hasn't yet been divided because divorce isn't finalized? I hope to finalize in 2023, but he's dragging it out by refusing to share info. (He also cashed out his 401k account this year to buy a new truck; he claims he works hard and should be able to drive whatever he wants...he's not even 50 years old! I am supposed to get 1/2 of that and he'll have to pay the penalties. We couldn't afford payments on a new vehicle so in his mind this was a good way to get a new truck (dumb!) and could do it without me because my name isn't on his 401k and he got a loan on his own. (My name isn't on the truck either.) Would they go after the truck first since it's solely HIS asset? He got a $10k bank loan, $10k cash gift from his dad, and borrowed $15k cash from his dad, (though I doubt he'll ever repay that), so the truck is "his" except for the $10k bank loan. If he continues making the payments on the bank loan he got, he'll own it outright by himself.) I'm scared, feeling alone, trying to protect our kids with sound financial decisions so we don't end up even worse off, and don't know the best (& legal!) way to handle this. Divorce lawyer suggested I eat the debt because it was put in a joint account & spent on our family, but I feel that's not fair. It hurts me financially when I paid extra federal all year to ensure a refund, and he's now hiding money in a separate bank account that I can't access, so I (and our kids) would be paying for HIS mistakes if the IRS comes after me for 1/2 or all of the taxes his employer failed to withhold when he's the one who didn't even bother to check his stubs and I had no access. (Yes, I need to find a better lawyer who will help me stand up for myself. It's crunch time though, and I'm in a panic.)

 

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5 Replies
MaryK4
Expert Alumni

Should I file separately if I just found out spouse didn't have any federal tax withholdings? Or am I liable for the debt either way?

If you file a joint return, you will be responsible for the taxes owed.  For this reason, separate may be the better option.

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Should I file separately if I just found out spouse didn't have any federal tax withholdings? Or am I liable for the debt either way?

I'd file joint and take the 100 bucks. Since you are still married you both are on the hook, one way or another. Get a lawyer and let them sort it out during the divorce. I'd try to keep the tax guys out of the divorce mix. Check with IRS to see if you can later amend your return after filing to separate filing status- this may give you an out if you change your mind.

Should I file separately if I just found out spouse didn't have any federal tax withholdings? Or am I liable for the debt either way?

Thanks for your reply. As I understand the Innocent Spouse Relief, I can only claim this if we file jointly and only if *I did not know about the underpaid taxes upon signing the joint return*. My lawyer said the IRS and divorce courts rule separately, so anything decided by a judge doesn't factor into the IRS's rules and regulations. Lawyer also doesn't seem interested in going after this. (As mentioned, it seems I need a new lawyer who'll better look out for my best interest and the best interest of our children. I'm down to crunch time since this just came up on Friday, though, so finding a competent new lawyer and getting this filed by April 18 would be too tough. Filing an extension would just add interest to the money he owes, so that'd be a rebuttal for him if I had to go after him later.) I would really just like to know if I'd be providing myself any sort of protection by filing separately. If I file jointly and then try to amend to MFS status and have to involve lawyers, that'd be an additional expense and additional time and stress...none of which I have extra to give. :(

Should I file separately if I just found out spouse didn't have any federal tax withholdings? Or am I liable for the debt either way?

Thank you very much, MaryK4. Do you know if the IRS would first go after his (solely-owned) assets or would they be more likely to put a lien on our (still jointly owned) home? I have to start separating our bank accounts now (which I still haven't figured out because I cannot afford the bills myself and he'll get angry and withhold any money from me once I do that. It's a mess.) My divorce lawyer said I have to make sure I take out my "half" of his early 401k withdrawal to ensure I get that (because he claims he was going to use that to pay his dad back, but he hasn't done that yet), plus half of whatever is left in the account after I withdraw that 401k money. (He's going to be so angry, but if I don't follow the divorce lawyer's directions this will never end.) Me taking that money out will not leave him enough to pay the $6282 he'd owe the IRS, so I'm hoping he'd be able to set up payments with them. (?) They'll probably take his unemployment checks which will seriously hurt as I cannot afford this house on my own (he has traditionally paid 75% of the bills; I have always worked from home to care for our kids, and unemployment really isn't even enough for us to scrape by so we'll be dipping into what little we have in savings. This is his fifth job loss so we were still in recovery mode when he got fired again). I'm just in a pickle and feeling really lost. I know it's complex. When it rains, it pours. I just don't want to do anything that will make this more expensive, be illegal, or come back to hurt me more than taking the big hit of getting only a $100 refund (of which he'd want $50) while *I* have to pay off the debts he should have never incurred.

MonikaK1
Expert Alumni

Should I file separately if I just found out spouse didn't have any federal tax withholdings? Or am I liable for the debt either way?

If you were to file a joint return, both you and your spouse may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. This means that one spouse may be held liable for all the tax due even if all the income was earned by the other spouse. 

 

Also, once you file a joint return, you cannot convert to separate returns for that tax year after the due date of the tax return.

 

The IRS is not going to take enforced collection action on a 2022 tax return until there has been an assessed tax liability from a filed or substitute tax return and after several notices have been sent asking for payment. In the meantime, work with your attorney on how best to deal with your joint finances and assets, and other legal issues.

 

You may want to consider filing a separate return. You said you don't live in a community property state, so filing separately is much simpler than it would be in a community property state. There are some credits that aren't allowable using Separate filing status.

 

You can use TurboTax Online to test different scenarios before deciding to file jointly or separately. Click here for more information.

 

See IRS Publication 504 for more information.

 

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