Here is the typical scenario: Wife incurs tax debt prior to marriage and never pays it off. She then marries Husband years later. The IRS starts to collect upon her again. She and her husband start to wonder whether his bank accounts, assets and wages are at risk for levy and wage garnishment. Huge fighting between husband and wife ensue. Is husband at risk for IRS collection activity even if the IRS tax debt was incurred by his wife before they were married (called a “separate liability”)?
Tax information for married couples
Spousal tax liabilities can wreak havoc on a marriage. Whether the new spouse is liable depends on if the couple lives in a community property state. In the scenario above, if the couple lived in a non-community state and if the tax liability was a “separate liability,” the IRS could not levy or garnish upon the non-liable spouse’s assets, bank accounts or wages. But, if the couple lived in a community property state, it does not matter that the tax liability was separate. The non-liable spouse’s assets, wages and bank accounts would be at risk for IRS levy and wage garnishment, subject to certain procedures the IRS must be in compliance with.
Do not panic as wage garnishments and bank levies do not occur immediately after the occurrence of a tax liability. The IRS must first send notice to your bank or employer that they will engage in a levy or garnishment. You will have the right to contact IRS appeals under the IRS Collection Appeals Program by filling out Form 9423. Also, a non-liable spouse may claim an exemption for levied wages. The IRS Code provides for a minimum exemption from levy for amounts “payable to or received by an individual as wages or salary for personal services….” IRC 6334(a)(9).
Tax liability for married couples: Community property law
The following is a list of community property states designating the percentage of how much the IRS can take from your non-liable spouse:
- Arizona 50% (With some variation)
- California 100%
- Idaho 100%
- Louisiana 100%
- Nevada 50%
- New Mexico 50%
- Texas 50% (With some variation)
- Washington 50%
- Wisconsin 50% (With some variation)
Thus, if you reside in California and your non-liable spouse has $2,000 in a separate bank account, all of it can be levied. If you live in Arizona, the IRS can levy upon only $1,000 or 50%.
It is important to note that a wage garnishment is “continuous” until the tax debt is completely paid off, if you are the taxpayer owing the debt. Of course, there are ways to get it removed while trying to resolve your taxes through full payment, an IRS payment plan, placement on a non collectible status or an offer in compromise. If your non-liable spouse is garnished, however, it is not continuous. The IRS must issue a separate levy to continue to garnish their wages.
IRS enforcement and collection activity can easily be avoided by simply responding to notices and coming up with a plan to pay it off or to resolve it. Seek advice from an IRS tax lawyer to see what program or IRS solution is right for you. You want to do it properly the first time without incurring any devastating bank levies or wage garnishments.
For further information or IRS tax help with your specific tax debt relief situation, call Delia Law Tax Law Firm in San Diego at (619) 639-3336 or request a free tax attorney consultation.
This blog post is not intended as legal advice and should be considered general information only.