December 3, 2015 by Jay Freeborne

Community Property Law States and Common Law States:
How Your Tax Problem Gets Resolved Depends on Where you Live

The Community Property Law States: Washington, California, Colorado, Wisconsin, New Mexico, Texas, Idaho, Arizona, Louisiana and Nevada

The Common Law States: Everybody else.

If you owe taxes but your husband/wife do NOT share the tax debt, then the distinction between Community Property Law and Common Law becomes very important. 

Tax Resolution in Community Property States: Both Incomes Must Be Combined

If you are in a Community Property state, irregardless of whether your husband/wife owes the tax or not, you need to list your ENTIRE household income and expenses when calculating the "tax resolution" of your tax problem. The "assets," however, of our spouse, that were owned pre-marriage are NOT in "play." But any assets you own together after marrying are factored in.

What does this mean really?  Well if you owe a lot of money to IRS - you don't want to marry someone rich in a CP state because, he/she is likely going to prevent you from qualifying for a Offer in Compromise for example. However - if you marry poor (or are the sole-provider) getting married can improve your tax resolution - this latter principle would also apply in a Common Law state below.

Tax Resolution in Common Law States: You Can Separate Income/Expenses

When our customer is in one of the Common Law states, we can separate a non-liable spouses income, expenses and assets (to some extent) when calculating a client's tax resolution. However, we need to first combine the income and expenses on one financial statement BEFORE removing the non-liable spouses data and creating another financial statement which reflects the liable spouse only.

With nearly 27 years of practice, Washington Tax Services knows the ropes of resolving tax problems in CL and CP States. If you are in debt to the IRS or State, call us for a free consultation to discuss your options OR EMAIL us HERE and we'll contact you at the time you specify. Staff of Washington Tax, since 1989. 

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