My husband died 4 days ago. He was a small business owner of which I had nothing to do with. It was between him and his father. I am pretty sure he did not pay the payroll taxes or even personal taxes for this year. Will I be responsible for those taxes at all when I file taxes this coming year? We filed jointly last year.
You are not directly responsible for these taxes unless you file jointly in the coming year. Filing as married filing jointly or married filing separately is a year by year election and just because you filed jointly last year does not mean that you have to do it again this year. Your husbands probate estate will be responsible for the payment of the taxes if he files separately.
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His estate is responsible for his taxes. You are not responsible for his business taxes, but as yoo signed jointly you may have exposure. As for this year, you should consider filing married filing separately. Finally, if you are sued by the IRS for the open prior years you may need to consider using the innocent spouse rules to avoid liability. Get with an estates/tax attorney immediately.
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My concern is with your statement that he even owed personal taxes for this year. Did you file married filing jointly for this year? If you did sign the tax return with an amount owing and it has not been paid in full then you are liable for this particular debt. If you did not file together and did not sign the return then he is solely responsible.
However, the IRS may still come knocking. When an individual passes away and they owe back taxes the IRS will more than likely contact the Estate to secure payment.
I highly recommend that you contact an experienced tax attorney to assist you with this matter. If the matter involves the Estate make sure you inform the Attorney of this from the outset. Not all tax firms are willing to represent the Estate.
My condolences to you on the loss of your spouse.
In addition to the answers given to you by the other attorneys above, I understand that the federal and state/local government to who his business may have owed unpaid payroll taxes can hold not only his business liable but also -- if his small business to which you referred was an entity such as a corporation -- the government can pierce the limited liability of the entity and hold your deceased husband (and therefore his estate) personally liable.
Payroll taxes are a very serious matter as they are considered "trust fund taxes" as essentially your husband's business, assuming it had employees and incurred these liabilities, was withholding the social security/medicare taxes, along with income taxes, of the employees from their paychecks and therefore required to timely remit these payments to the government and timely file payroll tax returns.
In the end, if his estate becomes liable for payroll taxes, they can reduce any equity in whatever assets the estate has to distribute to its beneficiaries, which I assume you are one of or may be the only beneficiary as surviving spouse.
Another question you need to have answered is who are the beneficiaries of your husband's estate? Was his father -- your father in law -- a beneficiary? Who is to inherit the business? You need to consult an attorney on this matter.
As far as income taxes and income tax returns are concerned, there is joint and several liability for the spouses who sign and file a married filing joint return -- regardless which spouse is the source of the items reported or required to be reported on the tax returns. If there are unpaid income taxes from any married filing joint income tax returns filed previously, your husband's estate is liable as well as you -- unless you qualify and claim innocent spouse relief to reduce your personal burden as mentioned above. There needs to be a final income tax return for your husband through his date of death to report any income (including business income) for this year --- 2011. You may want to consider whether there will be two married separate income tax returns for tax year 2011 -- one for yourself and one for your husband through his date of death, or a married filing joint tax return. If you file as married filing separate, you are responsible for your own income tax return for the tax year for which it is filed and thus legally cannot be held responsible through the joint and several liability of a married filing joint return.
Your husband's estate may have estate tax and income tax obligations also. Your husband's estate may require a formal court appointment of an executor (of a will) or administrator (without a will) of his estate to handle any tax obligation in addition to handling any other open matters.
In the end, please consult both a tax attorney and an estate attorney to deal with these issues to determine what exposure you may personally have for income tax returns and the impact on the assets of your husband's estate, if any, from his income tax obligations and the payroll tax obligations of his small business.
Again, so sorry for your loss of your husband.
Suzanne Alexanda Ascher, Esq., CPA, Tax LL.M.
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