Believe it or not, I don’t watch TV very much. However, my wife and son sat me down to watch the series Breaking Bad. We are on episode 13 of the drama spotlighting a cancer-stricken high school chemistry teacher turned methamphetamine manufacturer. The acting is superb.
The other night I told my wife that if Walter White (the main character) dies from his lung cancer, his wife could be liable for for tax evasion because of the unpaid taxes from the drug income.
However, Walter’s wife, and Flin (the son stricken with cerebral palsy) could be spared from the IRS if she meets some requirements under Spousal Tax Relief. The IRS states the following:
You may be an injured spouse if you file a joint tax return and all or part of your portion of a refund was, or is expected to be, applied to your spouse’s legally enforceable past due financial obligations.
Here are a couple of facts:
1. To be considered an injured spouse; you must have paid federal income tax or claimed a refundable tax credit, such as the Earned Income Credit or Additional Child Tax Credit on the joint return, and not be legally obligated to pay the past-due debt.
2. Special rules apply in community property states. For more information about the factors used to determine whether you are subject to community property laws, see IRS Publication 555, Community Property.
Now, the Whites live in New Mexico, a Community Property state. That could mean that the income (whether illicit or not) could be attributable to the Walter’s wife because it is earned income. Also, that fact that she knows that he is somehow paying for his chimotherapy my hurt her defense that a reasonable person should have known that $50,000 doesn’t materialize out of the air.
This article is not meant to be tax advice but a warning to persons regarding their spouses’ mysterious income. If you find yourself in such a position, you can talk to your CPA tax advisor and visit www.irs.gov
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