Normally, there are several reasons for a couple to file as married joint. One significant advantage is having lower tax brackets than those filing separate. For example, if you file jointly, you will receive a $10,000 refund. For simplicity’s sake, let’s say each spouse earned 50% of the total income. Filing separately will only get you $3,000 each. Sounds like filing joint is a no brainer right?
However, when one spouse has certain debts, it can complicate this decision. Suppose your husband, now in his second marriage, has $8,000 of debt for past child support obligations. If you file jointly, you should receive a $10,000 refund. However, the IRS will apply the first $8,000 of the refund to the child support debt, leaving you with a refund of only $2,000. This refund reduction can be caused by several other types of debt as well, including federal and state back-taxes, student loan debt, and spousal support debt. So what are you, the innocent spouse, able to do to enjoy the perks of filing jointly without having your share of the refund snatched away? The IRS has a form that makes it possible. Form 8379, the Injured Spouse Allocation form, a simple form consisting of several yes or no questions, allows a spouse to protect his or her portion of the refund from the other spouse’s debts. In our scenario, one half, or $5,000 of the total refund will be protected from IRS levies for a savings of $3,000.