One thing that married couples quickly realize is that the financial mistakes of one spouse can come back to haunt the other spouse. With Form 8379, however, couples can often save a portion of a tax refund from getting used to pay off one spouse's debt. Let's take a closer look at Form 8379 to find out how it can help put more money back in your pocket, and save one spouse from the other's past mistakes.
Form 8379 and the injured spouse allocation
Form 8379 is titled Injured Spouse Allocation, which gives a general idea of its purpose. In general, the IRS can collect past taxes or other federal debts that one spouse owes from a refund on a joint return. If you don't file Form 8379, then the entire amount of any refund on the joint return will go toward paying off those past debts, effectively leaving the other spouse in the cold without a fair share of that refund money. That is consistent with the way that many couples treat their joint finances.
However, Form 8379 lets couples argue that one spouse's portion of their tax refund shouldn't be used to pay off the other spouse's debts. If the injured spouse -- the one who doesn't owe the debt -- earned part of the tax refund, and only the other spouse is legally responsible for repaying the debt, then filing Form 8379 can result in the IRS paying a partial tax refund to the injured spouse.
How the injured spouse allocation works
To qualify, a couple has to establish that one spouse is injured. The debt must be incurred for federal or state income tax, state unemployment compensation, child or spousal support, or federal nontax debt, like a student loan.
In addition, the couple must show that only one spouse owes the debt. As the form shows, this involves a detailed look at state laws, especially in states that respect community property. The instructions for Form 8379 include specific directions for residents in nine different states, many of which have subtly different rules governing how much of a joint tax return can be used to pay off one spouse's debts.
After jumping over those preliminary hurdles, the injured spouse then has to take the items on the joint tax return and break them down between the two individual spouses. Income, adjustments to income, deductions, exemptions, and credits get allocated to the two spouses, as does tax withholding and any estimated tax payments.
This can get complicated, but the general idea is to see what the tax situation would have looked like if the two spouses had each filed separate returns. With some items, such as estimated tax payments, the spouses can agree to a certain division between them. On others, such as wages, the actual amounts earned are what you have to use.
The IRS is responsible for calculating the division of the refund between the two spouses once you file Form 8379. Processing takes a relatively long time, ranging from eight weeks to 14 weeks depending on whether you file electronically, and whether you file the form along with your joint tax return or separately.
Form 8379 won't let you get your full refund back if one spouse owes money to the IRS. It will, however, give an injured spouse the chance to get at least some money back, and that can make a big difference at tax time.
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