April 08, 2019
By Coleman Jackson, Attorney, Certified Public Accountant
Texas is a community property state, which means that income earned by either spouse during their marriage is an item of community income. Under federal tax law, each spouse is liable for federal taxes on community income regardless of which spouse earned the item of community income.
Under Internal Revenue Code Section 66(b), the Internal Revenue Service can modify the federal tax outcome resultant from application of community property laws and charge only one spouse with respect to an item of community income if that spouse acted as if they were solely entitled to the item of income; that is, they used it on themselves and not the community or household benefit, and they did not notify their spouse of the item of community income before the due date for filing the spouse’s federal tax return for the applicable tax period.
This is only one of the many situations where an innocent spouse might be relieved of federal tax liability. There is also, sometimes equitable relief available for innocent spouses even when the couple filed a joint tax return which created joint and severable liability for both spouses for the entire amount of the tax deficiency, penalties and interest due on the joint return.
This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader. You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.
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