If the husband’s and wife’s names and signatures appear on a state or federal personal income tax return, both are liable for the taxes. If a couple files jointly, the Internal Revenue Service generally holds each spouse responsible for the entire debt.

In some circumstances, a spouse who signed a joint tax return can be excused from liability if the spouse can prove that he or she is an innocent spouse. A wife or husband can be considered an innocent spouse if he or she did not know–and had no reason to know–that the tax return understated the true tax.

That is often hard to prove. For example, the Wall Street Journal reported a case in which the wife of an IRS auditor did not know that her husband was taking bribes, but neither did she ask how they could afford expensive education for their children and country club dues on his government salary. The wife, as well as the husband, was found liable, for $150,000 in unpaid taxes and penalties. (The husband also went to jail.)

On the other hand, a wife who relied on her husband and a certified public accountant to file a proper tax return, was held not to be liable when a deduction for one of the husband’s tax shelters was not allowed by the IRS.

If a married person wants full protection against possible liability for inaccurate tax returns filed by his or her spouse, the best approach is to file as "married filing separate return." That, however, usually results in a higher combined tax payments for the husband and wife than if they filed a joint return.

A married couple’s income tax payments may be higher or lower than the taxes would be if the couple remained single depending on the income levels of each spouse. If one spouse has a high taxable income and the other spouse has a relatively low taxable income, they will generally pay less income tax if they are married and filing a joint return than if they are single and filing as single persons.

For wives and husbands who both have high incomes, their combined tax will be higher when they file as married persons than if they file as two single persons. Members of Congress periodically promise to remove the "marriage penalty" from federal income tax laws, but as of June 2000, that has not happened.

Years ago, there were stories about financially well-off married couples who would go to the Caribbean each December, obtain a divorce, file tax returns as single persons for that year to save money, and then remarry in the new year. Such a practice could be regarded as tax fraud. In any case, the savings are not as great as they were in years past.

Sidebar:   Gifts Between Spouses

One spouse may make gifts to the other spouse in any amount without paying federal gift taxes if the spouse is a U.S. resident. However, it must be an outright gift or set up as a proper trust. Most, but not all, state laws have done away with taxes on gifts between spouses.

The same is not true with respect to gifts to other family members or to persons outside the family. Gifts to children, other relatives, people outside the family, and trusts may be taxable if they exceed a certain amount per year. Under federal tax law, one person may give someone other than a spouse up to $10,000 per year without paying any tax on the gift. A married couple could give $20,000 to a person each year without paying a gift tax. Both single people and married couples can make an unlimited number of tax-free gifts each year. However, if some or all of the gifts are made above the allowable dollar amounts, the overage will be deducted from the $675,000 federal estate tax credit that all Americans have as of 2000 and 2001 (it will go up by increments to $1 million by 2006). So, if the annual gifts exceeded the permissible amount by $30,000, then the gift maker would have only a $645,000 credit, and his or her estate would be liable for taxes on that $30,000 to the extent that the estate exceeded $645,000