If my spouse owes the IRS taxes can they come after me?
The answer to this question will depend on whether the liability is a joint liability or separate liability and whether you live in a community property state or not.
If the IRS liability is a JOINT liability then you and your spouse both owe the taxes even if you did not have your own income. If you sign a joint tax return, you will be responsible for the taxes on the return. So, YES, the IRS may levy both your and your spouse’s wages, assets, and/or accounts.
When it comes to wages, IRS guidelines suggest that only the spouse with the higher income should be levied (a wage levy is the IRS term for a wage garnishment). But, in cases where the taxpayer is refusing to pay, the instruction is to levy both spouses’ wages. Keep in mind that a portion of wages will be exempt from levy, so the IRS can’t take all of your or your spouse’s wages. If you receive Social Security income, the IRS can levy 15% of the social security payments before it reaches you. However, all amounts up to the balance owed can be levied in your bank account.
If you file a separate return but your spouse files a separate return owing the IRS, then his liability is SEPARATE and his alone, and the IRS may NOT levy your wages, assets, or bank accounts. However, if you live in a community property state, it does not matter that your liability is separate, meaning that your spouse’s wages, assets, and bank accounts can be levied. See below for more details on this important exception. Also note that the IRS must comply with a series of procedures before it can levy wages, bank accounts, and other assets.
IRC 6331 JOINT BANK ACCOUNT LEVIES
If your money is deposited into a joint bank account with your spouse, those funds become your spouse’s funds. If your spouse owes the IRS and the IRS levies your spouse’s accounts, then all of the funds in a joint account are subject to the levy. In other words, IRS has a right to levy ALL of the funds in the joint account to collect any balance due owed by your spouse. It won’t matter if you don’t owe the IRS. The IRS can take funds from a joint account even if only one of the owners of the account has a tax debt. This applies to joint retirement accounts or savings accounts and safety deposit boxes. If your name is on it, the IRS can take it.
The IRS can usually find accounts with your name on them because all banking institutions have to share account information with the IRS. The Internal Revenue Code Section 6331 gives the IRS the authority to levy your accounts and the Supreme Court in 1985 held that this collection remedy gives the IRS the authority to determine the rights of the innocent third party involved. Ouch!
Recommendation: if the IRS is in a position to levy you, and your spouse is not liable for the tax debt, do not deposit your spouse’s (or a third party’s) funds into your accounts. Better yet, resolve the tax liability prior to enforcement so that neither of you gets levied.
IRS COLLECTION IN COMMUNITY PROPERTY STATES
In community property states, your spouse’s wages and bank accounts can be levied even though your spouse is not liable, and even if you keep separate bank accounts. There are nine community property states listed below. Some states allow 50% of your spouse’s property to be community property while other states allow for 100% of your spouse’s property to be community property. So, depending on what your state allows, the IRS may be able to collect from a spouse either 50% or 100% of the community property even if that spouse is not liable.
If you live in a community property state, it provides property rights in your spouse’s property creating “community property” from which your creditors, like the IRS, can collect. Therefore, the IRS can levy your husband or wife’s wages and bank accounts even though your spouse is not liable.
COMMUNITY PROPERTY STATES:
- California 100%
- Idaho 100%
- Louisiana 100%
- Arizona 50% (With some variation)
- Nevada 50%
- New Mexico 50%
- Texas 50% (With some variation)
- Washington 50%
- Wisconsin 50% (With some variation)
For example, if you live in California and your non-liable spouse has $1000 in a separate bank account, it can all be levied. But, if you live in Arizona, only 50% of that $1000, or $500, is subject to levy.
In California, the IRS can calculate a wage levy against your non-liable spouse based on 100% of his or her wages. In Arizona, the IRS would calculate a wage levy based on only 50% of your non-liable spouse’s wages. Remember, the IRS wage levy exemption prohibits them from taking 100% of your or your spouse’s take home pay.
A levy against your wages is typically continuous; that is, one levy against your wages will continue to take the non-exempt portion of your wages until the liability is paid or you get them to stop the levy. A levy against your non-liable spouse, however, is not continuous. So, the IRS would have to issue a separate levy each time it wishes to take your non-liable spouse’s wages.
The IRS can levy your non-liable spouse’s separate bank accounts, IRA or 401(k) if it believes the funds in those accounts are community property. For example, if you live in a community property state where 100% of your spouse’s earnings are community property, then your spouse’s 401(k) can be levied at 100% to satisfy your liability. It will be up to you or your spouse to prove to the IRS that the funds in the 401(k) were not community property.
If you have a pre-marital agreement opting out of the community property of the spouse which you entered into before the tax liability was incurred (or could reasonably be anticipated), then your non-liable spouse’s property would be considered separate and unreachable by the IRS. However, the IRS may be unaware of the pre-marital agreement, in which case it could proceed with enforcement against your spouse, leaving you with the task of proving, after the fact, that the levied assets are not community property.
Your non-liable spouse will get a copy of the levy notice sent to the bank or employer. Both you and your spouse have the right to appeal the levy under the IRS Collection Appeal Program.
It is well understood that debt, in general, and IRS tax debt in particular, is stressful on a marriage. In a community property state, the consequences of your tax debt on your marriage can be especially devastating. Imagine you live in California. Before you get married, you were happy go lucky and forgot to file (and pay) a few tax returns. Five years later, you’re married, and out of the blue, the IRS starts levying your spouse’s wages. Your spouse had nothing to do with your past tax debt, but now he or she is involuntarily paying it off with his or her wages. No matter how kind and understanding of a spouse you have, he or she is probably not going to be happy about this. You would be well served to resolve your back tax liability before it gets to this stage.
Enforcement, such as wage and bank account levies, does not happen immediately after a tax liability comes into existence. There is a process of collection that builds up to enforcement, so it does not have to come to that. If your situation is handled properly, you should be able to avoid enforcement from the IRS in most cases. Seek advice from a tax professional, particularly if you incur a tax debt which you are unable to pay in full promptly.
A good tax relief professional should be able to prevent levies against your spouse (as well as you), especially if you retain them before your tax liability gets too deep in the collection process. If you are concerned about this, give Fortress Tax Relief a call. We have caring and knowledgeable professionals on staff would be happy to discuss your options with you for no charge. Plus, you can also find out if you qualify for money-saving tax relief programs. The call is free, so pick up the phone and call Fortress Tax Relief today.