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A married couple's tax debt: Not always yours, mine and ours

As we head into the new year, we trust everyone has taken a few minutes to work out a tax strategy for 2016. Planning for deductions and tax credits, looking at pre-tax contributions to employer-sponsored retirement plans and other benefits -- everything should be in place by now, and we should all be able to sit back and enjoy the long weekend.

Of course, for some of us, the process is fairly straightforward. Married couples, however, should not skip one important step. They must decide whether they will file jointly or separately. Filing jointly, they take on the couple's entire tax obligation; each will be responsible for the entire amount, not just his or her share of it.

As you and your spouse work on your tax strategy, then, you will want to ask yourself if you are not just willing, but able to take on your spouse's tax obligation in addition to your own. Again: If your spouse is not around to pay any unpaid taxes, you alone will be responsible for the debt.

The state of Minnesota does not care if a mistake on your return was an honest one, a slip of the pen or a simple math error. The state will correct the mistake for you, recalculate your tax obligation and then ask you to pay it. If the error is in the state's favor -- that is, if you owe the state more than you have paid -- the state will soon assess penalties, and the debt will start to accrue interest.

If it turns out your spouse has made the mistake, though, under certain circumstances you may not be on the hook. The state's Innocent Spouse Program allows you to avoid the financial consequences of your spouse's mistake.

Please note, not everyone is eligible. To qualify for the program, the following must be true:

  • Your spouse was responsible for the underpayment
  • You did not know anything about and did not benefit from the mistake
  • The mistake was discovered during an audit by the state or by the IRS

The last condition may be the hardest to accept. If the state finds the mistake during its regular review of a current tax return, you will not be eligible for the program.

If you find yourself in a situation like this, consider calling a tax attorney to make sure you understand all of your options.

Source: Minnesota Department of Revenue, Innocent Spouse Program, accessed Dec. 31, 2015

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