Marriage Penalty

Today TaxMama hears from Debby in Illinois who got quite a shock. “I have been married for about a year (have been together for many more). I just found out that my husband did not file tax returns for several years, including at least two when he was self employed. I am in the process of preparing the tax returns, which we will file. But have a question about self-employment FICA for 1996 and 1997. Is there some sort of statute of limitations? Is he still required to pay FICA for those two years? Any assistance you can provide is appreciated.”

Dear Debby,

It’s quite frightening to learn something like that, after you’re married, isn’t it?

I know, it’s unromantic, but, TaxMama suggests that before people get married, move in together, or even open a bank account together, they check out each other’s finances – get credit reports and copies of IRS reports – to see if there are any potential financial problems that will affect you.

Once you know, it’s easier to make a informed decision about getting married – or delaying the wedding until certain things are resolved.

But, you’re already married,…and you’re doing a good job catching up.

So, what about the SE tax from 1996 & 1997?

If you don’t file those tax returns and pay those taxes, the statute will always be open – forever. And interest and penalties just keep adding up. Will IRS try to assess or collect that money if you don’t file those tax returns? Honestly, I don’t know.

I’ve heard conflicting answers to this. Some people, even at IRS, say they will only insist on getting back tax returns for 6-8 years. Others say they want all outstanding tax returns. So you have to decide.

One thing that will help you with the decision – pull IRS transcripts for 1996 and 1997 and see if IRS has already assessed taxes for those years. You can get them for free by having your husband sign Form 4506-T. Check boxes 6 (b) and 6© to get records of any taxes assessed or
payments (including garnishments and levies).

Also, check box 8 to get copies of all W-2s or 1099s, in case he’s missing any income sources.
http://www.irs.gov/pub/irs-pdf/f4506t.pdf

If any 1099s were issued, odds are, IRS has already assessed the taxes based on his full income without any deductions. When you file the tax return, you will reduce the taxes, penalties and
interest due.

BUT, at the same time you will start the clock ticking again for a new 10-year collection period.

You’re going to have an adventure, and learn so much during this process. But I don’t envy you. Stay strong.

And remember, you’ll find answers to questions about getting hitched and all kinds of tax issues, free. Where? Where else? At TaxMama.com

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