Special Rules for Community Property States
Injured spouse rules and calculations are different in community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin — and sometimes Alaska, for couples who've signed a community property agreement. In these states, refunds and debt are generally considered to be joint property, and one spouse's refund can be used to pay the other spouse's debt [source: Erb].
However, even in community property states, there are ways to prove that a spouse's debt is not your own. For example, if Robin and Jamie have a premarital agreement that states Robin will have no part of Jamie's debt, the IRS will consider it [source: IRS]. If you can prove you're an injured spouse in one of these states, you might still get a refund, but the refund calculation will more than likely be a 50/50 split [source: Nolo].
Author's Note: Understanding the Injured Spouse Tax Form
As obscure as injured spouse relief might seem, marrying someone with debt is quite common. While writing this story, I came up with three things couples can do to avoid having to file as an injured or innocent spouse.
1. Before marriage, get to know your partner's credit and debt history just as you would his or her family and health history. Don't be afraid to discuss things like credit history, bill-paying habits, and spending and saving philosophies with a potential spouse.
2. When filing as a married couple for the first time, consider whether it makes sense to file separately or jointly [source: TaxAct]. For most couples, the standard deduction is higher when reporting joint income, and deducting combined expenses can lower a tax bill. But when a spouse has serious debt, filing separately could be advantageous. For this reason, it makes sense for newlyweds to get professional tax advice.
3. Regardless of how much you love and trust your spouse, share responsibility for finances and bill paying. Even if you consider yourself bad with money or numbers, get to know your tax returns and take the time to scan the numbers before you sign. If you work with an accountant, don't be afraid to ask questions about areas of the return you don't understand.
- How Health Savings Accounts Work
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- How is partnership income taxed?
- How Itemized Deductions Work
- Can you deduct hobby expenses?
- CNN.com. "Same-Sex Marriage in the United States." Nov. 17, 2014. (Nov. 24, 2014) http://www.cnn.com/interactive/us/map-same-sex-marriage/
- Erb, Kelly Phillips. "Taxes From A to Z: I Is for Injured Spouse." Forbes.com. March 3, 2012. (Nov. 24, 2014) http://www.forbes.com/sites/kellyphillipserb/2012/03/13/taxes-from-a-to-z-i-if-for-injured-spouse/
- Internal Revenue Service. "Community Property." Publication 555. Jan. 14, 2014. (Nov. 24, 2014) http://www.irs.gov/pub/irs-pdf/p555.pdf
- Internal Revenue Service. "Form 8857, Request for Innocent Spouse Relief." Oct. 15, 2014. (Nov. 24, 2014) http://www.irs.gov/uac/Form-8857,-Request-for-Innocent-Spouse-Relief
- Internal Revenue Service. "Injured or Innocent Spouse Tax Relief." March 28, 2012. (Nov. 24, 2014) http://www.irs.gov/uac/Injured-or-Innocent-Spouse-Tax-Relief
- Internal Revenue Service. "Instructions for Form 8857." January 2014. (Nov. 24, 2014) http://www.irs.gov/pub/irs-pdf/i8857.pdf
- Internal Revenue Service. "Section 5: Injured Spouse." Part 25: Special Topics. (Nov. 24, 2014) http://www.irs.gov/irm/part25/irm_25-018-005.html
- Internal Revenue Service. "Tax Refunds May Be Applied to Offset Certain Debts." March 27, 2012. (Nov. 24, 2014) http://www.irs.gov/uac/Tax-Refunds-May-Be-Applied-to-Offset-Certain-Debts/
- Internal Revenue Service. "Treasury and IRS Announce That All Legal Same-Sex Marriages Will Be Recognized for Federal Tax Purposes; Ruling Provides Certainty, Benefits and Protections Under Federal Tax Law for Same-Sex Married Couples." Aug. 29, 2013. (Nov. 24, 2014) http://www.irs.gov/uac/Newsroom/Treasury-and-IRS-Announce-That-All-Legal-Same-Sex-Marriages-Will-Be-Recognized-For-Federal-Tax-Purposes%3B-Ruling-Provides-Certainty,-Benefits-and-Protections-Under-Federal-Tax-Law-for-Same-Sex-Married-Couples
- Nolo.com. "Marriage and Property Ownership: Who Owns What." (Nov. 24, 2014) http://www.nolo.com/legal-encyclopedia/marriage-property-ownership-who-owns-what-29841.html
- TaxAct. "Injured Spouse vs Innocent Spouse." 2014. (Nov. 24, 2014) http://www.taxact.com/support/746/injured-spouse-vs-innocent-spouse/
- TaxAct. "Marriage and Filing Status." (Nov. 24, 2014) https://www.taxact.com/tax-information/about-your-taxes/marriage.asp