I went through a divorce about five years ago and my youngest child will graduate college this spring. I have just gotten my finances stable again and I am back saving money. I have about eight to 10 years left to work, and should have enough saved for a modest retirement when that time comes.
My concern is that I have a girlfriend that I want to marry. She is younger than me by 10 years and has some major financial baggage from her previous marriage. Her ex runs multiple successful small businesses and has more money than I will ever see in my lifetime.
That said, he is brilliant at financial and legal maneuvering, and she was left close to destitute in the divorce. During their marriage he built up large tax bills, they filed jointly, and he built up close to $100,000 that’s still due from when they were married.
Her divorce decree states that she is not responsible for the taxes as she was not part of the businesses, and never had any say in any of the family finances. On top of all that, she has a student loan of around $60,000 that she took out for her daughter’s education in her name.
Since her divorce I have watched as she has tirelessly worked to support herself and her teenage son. In a short amount of time, she has gone from the horrible situation her marriage left her in to being able to support herself and start down the path to a bright future.
My concern is my financial exposure to her past, especially if we have a house or other assets in both of our names. I wrote to you in the past about modifying the maintenance for my ex-wife, and you replied. Thanks for any advice you can give me this time around.
Perplexed in Missouri
Your fiancée sounds like a wonderful woman: hard-working, diligent, conscientious, and she is a survivor. She puts other people first and puts her trust in other people, sometimes to a fault. She clearly has many wonderful qualities, and I commend her for working so hard to provide a life for her son as a single parent. You clearly think the world of her, but you are skittish after your first marriage and, understandably, don’t want to expose yourself to another person’s financial shenanigans.
“If a married couple files a joint federal income-tax return, both spouses are jointly and severally liable for the full amount of federal income-tax liability for that tax year,” says Marcia Swihart Orgill, an attorney at Danna McKitrick law firm in Clayton, Mo. “Joint and several liability means the Internal Revenue Service can collect the full amount of income tax from either or both spouses, regardless of whether the income tax liability is attributable to the separate income of only one spouse.
In many cases, the Internal Revenue Service does not care what your divorce decree says. A divorce decree is issued by the state and the IRS is a federal agency. “A divorce does not prevent the IRS from collecting the entire unpaid income tax liability from either of the spouses. Under certain circumstances, a spouse may obtain relief from joint and several tax liability by timely filing Form 8857 and proving a claim for innocent spouse relief, separate liability or equitable relief,” she says.
However, a married taxpayer who files a joint income-tax return for the state of Missouri is only on the hook for the Missouri income-tax liability attributable to his or her own income, according to Swihart Orgill. “A taxpayer’s separate income includes his or her earned income such as wages, income from his or her own separately owned property, and his or her portion of income from jointly owned property, such as interest from a jointly owned financial account,” she adds.
You may also file a Form 8857 to claim for innocent spouse relief, separate liability or equitable relief. “To obtain separate income tax liability, an individual who filed a combined Missouri tax return must notify the Missouri Department of Revenue in writing that he or she is only liable for the income tax liability on his or her income per Missouri law and set forth the portion, if any, of the income tax liability that is attributable to his or her separate income,” Swihart Orgill says.
The headline here: Your wife is a survivor, and you are walking that line between finance and romance. That is, of course, the sweet spot for this column. It’s one of the reasons it exists. We even have a special avatar for such occasions! Putting that meta-analysis aside, this is a conversation you should also have with your girlfriend. She too should know whether or not she’s on the hook for her ex-husband’s tax bill should he fail to pay. It’s rarely simple.
I commend your fiancée for helping her daughter with her education. When you marry, you will not be liable for the tax bill or the student loan, but I understand that you want her to be debt free. People don’t often come with perfect financial records, but the big difference here — as I’m sure you are aware — is that your girlfriend’s financial responsibilities were not incurred by malfeasance. She was, perhaps, too trusting of her ex-husband. But on that front, you can certainly meet her halfway.
As of Friday evening, COVID-19, the disease caused by the virus SARS-CoV-2, had infected at least 19.2 million people globally and 4.9 million in the U.S. It had killed over 716,735 people worldwide and at least 160,976 in the U.S., according to data aggregated by Johns Hopkins University’s Center for Systems Science and Engineering.
New York has the most fatalities (32,760) followed by New Jersey (15,849). The stock market has been on a wild ride in recent months. The Dow Jones Industrial Index DJIA, +0.17% and the S&P 500 SPX, +0.06% ended up Friday as investors awaited round two of a fiscal stimulus, but the Nasdaq Composite’s COMP, -0.87% 7-day winning streak ended at the market’s close.
Would you like to sign up to an email alert when a new Moneyist column has been published? If so, click on this link.Hello there, MarketWatchers. Check out the Moneyist private Facebook FB, +1.19% group where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.