I think my husband and I may be getting separated and divorced, and I am concerned about our 2016 tax return, which has not been filed yet. The tax return is under an extension. My husband has a small business in Greensboro, and I have no idea if he reports all of the income in the business. I have heard that I can be responsible if I sign the return. He never gives me a copy. Do you have any thoughts on this issue? Do I have to worry?
~ Worried and in the Dark
Dear Worried and in the Dark,
This is always a tough decision, and the law that applies to this is called: “Innocent Spouse Relief.” There are some things that you need to know in making the critical decision of whether to file a joint income tax return with your spouse.
First, you need to know that you do not have to sign a joint return, but if you elect to do so, you are potentially 100 percent liable for any income taxes, interest or penalties related to the return you sign. Yes, I said 100 percent, not 50 percent. You see, the Internal Revenue Code holds each signer of a tax return jointly and severally liable for all taxes, interest and penalties, absent a co-signer being an innocent spouse. So, to me, signing a joint tax return is always a big decision for a person with a small business. Contrast this with spouses who both have W-2 incomes from employment with third parties; if the only income on the return is W-2 income, then generally it is safe to sign a joint return properly prepared. You, however, are in the riskier situation with the small business.