Taxes and Marriage
Hi Terry
In the midst of a divorce, I took out 150,000 from my 401K! I was 60 and needed to purchase a home without my ex-husband. I knew I had to be of a certain age to avoid the penalties I met that requirement and my 401 cut the check. Following the divorce three years later back-and-forth taxes not being done I go to file taxes and I find out I owe 100,000 due to income and the 401 not having the taxes taken out at the time of the check. I’ve been paying on that debt ever since. I did the , innocent spouse route to reduce the amount of taxes since the ex was supposed to pay the IRS taxes we owed prior me taking the 401 money but he didn’t.
Now five years later, I am getting ready to retire at a much lower income of course, I’m newly married, but don’t want to put my new husband into the middle of my text mess. I owe 40k , 17k interest and the rest in penalties. What should I do? Should I pay it off? Should I continue paying $1000 every month that seems to be going nowhere to pay it this off , should I take out loan to pay it off? I just want to be retired and live happily ever after with my new spouse. Thanks so much for your help.
Terry Says
Wow, you’ve followed one mess with another! First, you got “taken” when your ex said he’d pay taxes. YOU owe the taxes because it was YOUR 40l(k) account! And those taxes should have been paid that year! Thus the additinal interest on what you owed. I hope you’re getting better tax advice now.
So, I’m assuming that you made a deal with the IRS. And they never change those deals, so yes, you’re stuck paying on this debt until it is paid off.
I hope you fully disclosed this tax obligation to your new husband before you two married.
Now, I suggest that you keep your finances entirely separate — including using the filing status “married filing separately.” That will cost a bit more in taxes, but it will keep the marital peace.
You’re retired, so you can’t take out a loan. BUT, whatever did happen to that house?? Are the two of you living in it now? If so, you might consider asking him to match your equity in the house, and then put it in joint name. So ask your mortgage company how much equity you have in the house. If it’s $100,000 ask if he will put in $50,000 — that is give it to you, in exchange for you changing title to the home to own it jointly.
Then use that money to pay off your tax debt immediately and get a complete and written release. I’d still file separately for a few years to make sure all of that is behind you. You need a good accountant — one who might be able to negotiate the balance or penalties down if you now have the money to pay it off!
That’s just my creative idea to put this all behind you.
