At the risk of being criticized as unromantic (a label often used for us male CPAs), I want to offer one tip for those about to say “I do” this Valentine’s Day: Find out how well you know your soon-to-be spouse’s finances. In particular, find out about his or her tax compliance, and whether you are about to marry someone with a propensity for tax problems.
Before you say “I do,” consider that financial stresses – that is, money problems – are a frequent killjoy in relationships (even more so than this article). Inheriting IRS problems when you marry your spouse can add more stress. Do you know whether your significant other has filed all of his or her tax returns? Does your girlfriend or boyfriend get challenged (audited) by the IRS frequently? Are there any unpaid taxes or penalties? And what do your significant other’s tax returns look like?
These are not conversations that often occur before the wedding day. But you can get answers to these questions and a good look at your soon-to-be spouse’s finances by asking the IRS a few questions before you say “I do.” Here’s how:
- Ask your soon-to-be spouse to sign a Form 8821, Tax Information Authorization. This form will allow you to call the IRS to ask questions about his or her taxes. Make sure you are authorized for multiple years so that you can ask a long history of questions. Also, make sure you are authorized to ask about any “special” penalty assessments by adding “Civil Penalty” as one of the authorized areas on the authorization form. This will allow you to ask questions about penalty investigations and assessments made by the IRS on any businesses your significant other may have been involved in.
- Call the IRS, with the authorization, and ask about your soon-to-be spouse’s account. Ask the IRS whether your significant other has any unfiled returns, tax debts owed, audits or underreporter inquiries, and penalties assessed. You can also ask whether your significant other has received any tax notices recently, and, if so, you can ask about the nature of the notice.
- You can get other interesting information, too. Ask for a tax return transcript, which is an electronic copy of your soon-to-be spouse’s electronic returns for the past three years. You can also get a copy of his or her income information by requesting a copy of all Forms W-2 and 1099 filed under your significant other’s name (this is called a wage and income transcript). These transcripts can reveal former marriages, dependent children, debt problems (Forms 1099-C show prior debt forgiveness), and other issues. You can have the IRS fax you this information directly, because you will be authorized to receive it with the Form 8821.
Or, you can create a bonding experience over your tax compliance history. Skip Step 1 above and have a date night with your soon-to-be spouse. On this date night, you can both call the IRS at (800) 829-1040, and navigate the IRS maze to speak to someone about your tax history, with no tax authorization needed. It makes for a fun and memorable experience together and further reinforces why you never want to have a tax problem.
If you’re not sure how well you know your soon-to-be spouse’s finances, check into it before saying “I do.” The IRS is a great source to find out whether you are about to inherit your significant other’s tax problems – and a great way to get to know your soon-to-be spouse better (think about what is on a tax return!).
My apologies for this skeptical Valentine’s Day warning. Good marriages have open communication and full disclosure – no secrets. Have a great Valentine’s Day, and don’t tell my wife I wrote this article.