It is not at all uncommon for a spouse to find out after marriage that their husband or wife owes back taxes to the IRS. While your new husband or wife may never be “personally” liable for those tax debts, their income and tax refunds may still be vulnerable to IRS collection tactics. Forewarned is forearmed.
If spouses file a joint income tax return and an IRS tax debt is owed by one of the spouses, the Service will generally offset the entire overpayment. If the spouse who does not owe the obligation (referred to as the “injured spouse”) files a claim for his or her share of the overpayment (referred to as an “injured spouse claim”), the Service is required to refund his or her share of the overpayment. The question is just what is that share?
In Texas, all tax debts may be satisfied with 100% of the liable spouse’s sole management community property (i.e., any withholding attributable to the liable spouse’s wages) and 50% of the injured spouse’s sole management community property (i.e., any withholding attributable to the injured spouse). In addition, 100% of any part of the overpayment that is attributable to the liable spouse’s separate property is vulnerable as well. See Medaris v. United States, 884 F.2d 832 (5th Cir. 1989)
Texas law provides that property acquired during marriage, other than by gift, devise, descent or personal injury recovery, is community property. Tex.Fam.Code Ann. Sec. 5.01 (Vernon 1975). Each spouse has a one half interest in all community property. See Broday v. United States, 455. F.2d 1097, 1100–01 (5th Cir. 1972). Therefore, the IRS can reach your non-liable spouse’s wages too — or at 50% of them.
What about other community property states?
Subject to some variation, the following quick reference chart is will give you an idea:
New Mexico 50%
What can a Pre-Nupital and Post-Nupital Agreement Do to Help?
The lesson here is to talk to your fiance about debt and back taxes before you marry. Taxpayers with a prenuptial agreement can opt out of state community property laws and elect to have income treated as if they were domiciled in a non-community property state, in which case Section 66 of the Internal Revenue Code (IRC) would not apply and a much better result will follow. Post-nuptial agreements allow spouses to accomplish many of the same goals as prenuptial agreements, but are executed during the marriage. In many cases, the IRS will accord the same effect to such agreements.