Home > 2015 > Credit Score

Could Your Spouse’s Tax Problems Affect You?

Advertiser Disclosure Comments 0 Comments

Dealing with tax problems is stressful enough. But it can be downright maddening to discover that your credit has been damaged over a tax bill you had nothing to do with. A Credit.com blog reader asked:

My wife’s credit report shows a tax lien from my taxes from before we were married. Is that legal?

Probably not, says Dan Pilla, the founder of TaxHelpOnline.com. In most cases, if the tax lien was filed against the husband, not the wife, then his wife’s “credit report should not show the lien,” he says. If they live in a community property state, though, the answer may be different. More on that in a moment.

First, a brief explanation of how tax debt affects your credit is in order. Tax debt isn’t usually reported on credit reports unless the Internal Revenue Service files a Notice of Federal Tax Lien. The IRS files tax liens to protect its interest in the property of someone who can’t or won’t pay the taxes they owe. Liens may be automatically filed for unpaid tax debts totaling $10,000 or more, and may sometimes be filed for smaller debts. (That limit used to be $5,000, so some consumers’ credit reports may show older liens for smaller amounts as well.) Tax liens may be reported for seven years from the date they were assessed if they have been paid, or indefinitely if they are unpaid. They severely damage consumers’ credit scores. 

It’s also worth noting that spouses have separate credit reports and the only time one partner’s credit or tax problems should affect the other person’s reports is when they share accounts (for example, joint loans or credit cards, or when one is an authorized user on the other’s accounts).

Community Property States

However, it does get tricky in the case of community property states — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin — which establish joint property rights. “It gets complicated because each spouse has a vested half interest in the other’s property regardless of how it is titled,” says Pilla. He gives this example:

Parties get married on Day 1. On Day 2, she buys a house in her name. Even if it is titled in her name only, it’s a community property asset which gives her husband half interest. The IRS can file a tax lien and it will attach only to the husband’s interest.

In the case of this reader’s question, “If they are in a community property state, then it becomes questionable, as the lien would only attach to community assets acquired after the marriage,” he says. In other words, if this reader lives in a community property state, his wife may want to investigate further to see whether the tax lien listed on her reports is a mistake.

How to Protect Yourself

What can you do to protect yourself from a tax lien on your credit report due to your spouse’s tax problems?

  1. If one of you expects to owe a large tax debt due to an action triggered by an issue that doesn’t involve the other (for example, he gets a 1099-C for a large amount of canceled student loan debt, or she sells stock she held in her name only and triggers a large capital gain), consult a tax professional to determine whether filing separately makes more sense. If you file a joint return, the amount you owe as a result will be a joint responsibility.
  2. If you already have a tax lien filed against your property due to your spouse’s tax problems, talk with a tax professional to find out whether it makes sense to attempt to file for Innocent Spouse Relief.
  3. If you, your spouse, or the two of you together owe a large tax debt you can’t pay, consider an installment plan with the IRS. You may be able to request the lien be removed if your payments are made on time for several months under one of these plans.
  4. Get your free annual credit reports at least once a year to see whether a tax lien or other serious negative information appears on your credit reports. In addition, it’s a good idea to get your credit scores, which you can do for free at Credit.com; a drop in your scores could indicate negative information has been added to your reports.

More on Credit Reports & Credit Scores:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team