Marc Anthony was recently ordered to pay $2.5 million in back taxes and penalties after failing to file tax returns for the past five years. Ouch! According to the Associated Press, Anthony failed to file tax returns for 2000 through 2004 on $15.5 million in income. He wasn’t prosecuted because he thought his accountant had filed the returns. Two of his associates, including his brother, have pleaded guilty to tax felonies and will pay back taxes and fines.
Jennifer Lopez wasn’t implicated because the couple did not file a joint return. But what if they had? What if you had a spouse who you thought was taking care of everything – but who had failed to file or, worse, falsified the return? Can the IRS come after you for something your spouse did?
It sure can. When you file a joint tax return, the two of you have “joint and several” liability for the accuracy of the return. This means that if your spouse fills out the tax return or gives erroneous information to your tax preparer that results in an understatement of tax, you are on the hook as well. However, you may have some relief under the “innocent spouse rule.” Under this provision you can claim that you are innocent of any wrongdoing because you did not know — and did not have reason to know – that there was an understatement of tax. Learn more about the innocent spouse rule here. http://www.irs.gov/individuals/article/0,,id=109283,00.html
Another question arises from this bit of celebrity financial gossip: Why do Lopez and Anthony file separate tax returns? In most cases it is more beneficial for a married couple to file a joint return. However, when there is a large disparity in their respective incomes, or when each spouse wants to keep his or her financial affairs entirely separate, it may make sense to file a separate tax return. If there is any question, you can always calculate the tax both ways and file whichever way is most beneficial. See your tax advisor for details.
Meanwhile, ordinary couples can use the tax filing experience to bring them closer together. The whole idea behind the concept of joint filing is that married people share their incomes and (deductible) expenses and make financial decisions together. If that’s not happening in your household, why not plan a romantic dinner over your latest tax return? It might inspire some quality communication about finances, goals, hopes, dreams, and concerns. Going over your Form 1040 after your taxes have been filed is a great way to review your overall financial situation and clarify any issues you don’t understand – not to mention getting a jump start on finding ways to reduce this year’s taxes.
