“For better or for worse, in sickness and in health…” If you’re an injured spouse you probably never imagined how appropriate those vows would be when tax season rolled around. Those words take on a whole new meaning when you file your first joint tax return with your spouse and unearth some deep dark secrets in their past that has resurfaced to haunt you.
Discussing past late child support payments, overdue state-debts and unpaid taxes may be unromantic topics to discuss over candlelit dinners. But, before you tie the knot, you should know that sharing your lives together means more than just your kids, your home, and, your family pet.
Back taxes or defaulted student loans from one partner will likely affect the tax refund owed to the other. You might be happy to lend your partner a helping hand, but this may prove to be a bit of a challenge when you’re trying desperately to reduce your own debt.
The term “injured spouse” as used by the IRS doesn’t have anything to do with abuse or physical harm. Read on to find out what it means and what to do if you’re an injured spouse.
The Meaning of Injured Spouse
Meet Jeff and Sally. The 2 love birds have been married for a little under a year. As an added way of solidifying their devotion towards each other, they’ve decided to file their taxes jointly.
However, before they met, Sally was down on her luck. She’d been laid off a couple of years before. Unfortunately, this meant that she had a hard time paying off the federal income tax arrears she owed from a few years prior.
Jeff, on the other hand, has been paying his taxes. As a matter of fact, he’s expecting a tax refund check that will go a long way in helping clear his outstanding student loans.
Fast-forward to a few months later. He’s surprised to get a letter from the US Treasury Department one morning. When he opens the envelope to read its contents he’s taken aback to find out that he won’t be receiving his refund check this year.
That the amount was redirected to the Treasury Offset Program to offset some of Sally’s outstanding balances. The news comes as a huge blow since he was counting on that money to settle some of his own debt.
He knew about Sally’s tax history but he never thought he was liable too. It’s at that moment that Jeff became an injured spouse.
An injured spouse refers to the person whose tax refund check is used to pay the past-due debts of their current spouse or their ex-spouse. When a married couple files taxes jointly, the IRS doesn’t automatically distinguish which of the 2 has debt even if the debt existed before the marriage. As an injured spouse, you basically tell the IRS to differentiate which member of the couple has a refund and which one owes money.
Types of Debt the Tax Refund Check Is Used to Offset
A potential refund check isn’t only used to offset federal tax debt. According to the Treasury Offset Program tax refunds can be used to collect on:
- Overdue state taxes
- Child support payment arrears
- Alimony payment arrears
- Any other debt that would qualify as federal debt. This includes unpaid student loans
It may seem harsh especially if only one spouse is responsible for the debt. That’s where the injured spouse relief comes in to save the day.
Injured Spouse Relief
With the injured spouse relief you get into an agreement with the IRS to use only part of the refund due to you, to go towards settling some of your spouse’s debt. That way you get a share of the refund.
But, how can you tell if you’re an injured spouse? The IRS has an online quiz that can help you figure it out. If you establish that you are indeed injured, there are some conditions you need to fulfill if you’re hoping to benefit from the relief. Here are some of them.
- First, you’ll need to prove that you’ve paid the required federal income taxes on wages or on an Earned Income Credit.
- You also have to agree to file your taxes jointly as part of a married couple. The IRS recognizes same-sex marriages that were performed in a state or a foreign jurisdiction where it is deemed legally binding. This applies to the couple even if they aren’t currently living in any of the 30 states that have legalized gay marriage.
- The IRS doesn’t recognize couples in domestic partnerships or civil unions as being legally married.
- If you and your spouse haven’t lived together for 6 months prior to filing, either of you may file under the “head of household” status.
- All married couples can file using the married “filing jointly” or “filing separately” statuses.
- If you have nothing to do with your partner’s original debt then you are an injured spouse. The original debt here refers to federal or state debt that’s past due.
- If both you and your spouse incurred this debt jointly or after you were married then neither of you is an injured spouse.
The terms injured spouse relief and innocent spouse relief may sound the same. But they’re actually quite different.
Injured Spouse vs Innocent Spouse Relief
Using the Jeff and Sally analogy, suppose that after10+ years of marriage, they decided to separate. Thanks to Jeff’s management of their family finances in the course of their union, Sally had managed to dig herself out of debt and now pays all her debts and taxes.
However, things took an unprecedented turn when she later learned that Jeff had been underreporting his own income and now, Uncle Sam is on her back. She assumed all along that Jeff had been paying his income taxes.
Little did she know that this couldn’t be farther from the truth and now, the IRS is about to withhold her own refund check. In this case, Sally is an innocent spouse.
If you’ve been misinformed or lied to about debt that accrued during the duration of your marriage to your ex, then you shouldn’t be held liable for it. The IRS is aware of this as well and that’s why they allow these individuals to request for innocent spouse relief.
How to Apply for Injured Spouse Relief
If you fulfill the IRS’ criteria and believe that you are indeed an injured spouse, then your first course of action is to file the federal 8379 form. You’ll need to file this form annually for each year you’re seeking relief.
You can download the injured spouse form from the IRS website and file it electronically or through the mail. You have 2 options here: Attach it to your tax return and mail both documents together or, alternatively, you can send it in separately if you had already filed your tax return.
Remember, the IRS receives a lot of documents during tax season. If you decide to mail a hard copy of Form 8379, it helps to indicate “Injured Spouse” at the top of your 1040 return form so that they are aware.
Otherwise, they might go ahead and offset your refund. If you’re filing Form 8379 separately from your Form 1040 return, don’t forget to write both your spouse’s and your social security number on it. They should be in the same order that they appear in your 1040 form or all other IRS-related documents.
Completing the IRS Injured Spouse Form
First, make sure that you’re completing the correct form. If you’re requesting innocent spouse relief, you need to complete Form 8857. You must also be able to show that you had no way of knowing about the existence of the understated tax, or, signed off on something that you didn’t understand.
This particular relief was recently expanded to take into account cases of abuse and controlling spouses. The process of applying for innocent spouse relief may prove to be a bit of an uphill task.
On the other hand, completing Form 8379 for the injured spouse claim is a pretty straightforward process. It begins with a short quiz comprising yes/no questions.
These determine if the applicant qualifies for the injured spouse relief. It’s always a good idea to have a copy of your joint tax return close at hand to itemize your income, expenses, adjustments, and credits if any.
You should always attach a copy of the W-2 Form as well as the 1090 Form to show all applicable tax withholdings. You should also be aware of the time constraints associated with filing Form 8379.
You have a period of 3 years (including extensions) from when the original tax return was due or 2 years after the date when you paid the tax which was then offset, whichever comes later. If both periods expire before you get a chance to request for injured spouse relief, then extraneous circumstances may give you additional time.
Patience Is Key
As you would expect, it may take a bit of time before you hear back from the IRS concerning your injured spouse claim. You, therefore, need to exercise some level of patience.
If you file Form 8379 together with your joint return, it should take approximately 14 weeks for the IRS to process your form if you filed by mailing them a hard copy. On the other hand, if you file both documents electronically, it should take no more than 11 weeks to receive feedback from them. If you had previously filed your joint return, the entire processing time shortens to an average of 8 weeks.
How Much You Can Expect to Get Back
Once the IRS determines that you are indeed eligible for an injured spouse relief refund then they’ll go ahead and calculate it. They base the amount on what you would have received, had you both filed your returns separately.
When calculating what amount to refund, the IRS takes many things into account. First, the salary/self-employment incomes, expenses, and credits are each allocated to the individual spouses as per how those items would have been listed in their respective returns had they filed separately.
Next, those items that aren’t demarcated such as penalties or early withdrawal from a joint savings account are distributed equally between the couple. Finally, they apply a formula to calculate what the share of liability of the injured spouse is. This is the amount that the IRS will withhold from the injured spouse’s refund.
Special Rules That Apply in the Community Property States
In community property states, the rules and calculations that apply to injured spouses differ from those in other states. In keeping with their joint community property laws, all refunds and debts are considered to be joint property.
This means that one spouse’s refund can be used to offset the other spouse’s debt. Therefore requesting for injured spouse relief can be quite the undertaking.
Nonetheless, that is not to say you can’t prove to the IRS that your spouse’s debt isn’t yours. If you succeed at doing so, it is likely that the refund calculation will split the amount 2 ways.
The Bottom Line
Regardless of how much you love and trust your spouse, get to know your tax returns and take the time to comb through the numbers with a fine tooth comb. Ask questions about the sections of the return that you find ambiguous.
It’s one thing to share bills and finances. Sharing debt is a whole other ball game. Learning how to handle your taxes as a married couple could save you from becoming an injured spouse.
Do you know if you owe the IRS? Here’s how to find out.