Q: My husband and I have been married for 2 1/2 years and have not mixed any of our finances due to his poor credit history. We have filed taxes separately in the past, but this year we looked at filing jointly and would get much more money back.
My question is this…can filing jointly adversely affect my FICO score or credit report? I have deliberately not put my name on anything with him so as to protect my credit and this scares me!
A: You do have good reason for concern — as a spouse who has an excellent credit rating, and who has not co-mingled accounts or previously filed a joint tax return with your spouse who has bad credit. But let me offer you some perspective on the situation, which may ease your mind a bit.
First, the two of you have totally separate, independent credit reports and credit scores.
People sometimes mistakenly think that once they get married, a couple’s credit reports somehow get merged. That simply isn’t true.
By maintaining separate accounts (which was the right thing to do), you have managed to maintain your good credit and not subject yourself to potential adverse credit damage you could suffer if you signed a joint or co-authorized account with your spouse and for any reason that credit or loan that doesn’t get paid.
But what about tax returns?
Under normal circumstances, nothing about your tax returns shows up on your credit report or in any way impacts your credit files or credit scores. Nothing whatsoever. Doesn’t matter if you are single, married filing jointly, married filing separately. Doesn’t matter if one of you owes money and one gets a refund. As long you pay your taxes and there is no tax delinquency, there’s nothing tax-related that should impact your credit.
Now notice that I said “under normal circumstances” and that nothing “should” impact your credit. But if you do file jointly, is it even possible that something could wind up haunting you regarding your credit? Yes. I can think of a few scenarios. They may be far-fetched — or they may be very much in the realm of possibility. Only you can answer that.
Here’s one instance: Assume that you filed a joint tax return with your spouse and the two of you got a refund check, as you said your accountant advised you would get. But then, let’s say two or three years later, the IRS audits you. It now says you weren’t entitled to certain tax deductions – or whatever.
But now the IRS says you owe money. What if you can’t afford to pay it? What if the two of you have divorced? If, for any reason, the IRS decides to slap you with a tax lien, that lien will be directed at both of you because you filed a joint return.
Here’s another scenario: what if your spouse did something shady — like claiming bogus deductions or not fully disclosing all his income to the IRS. If the IRS decides to go after him with liens, wage garnishments or asset seizures — all of which would be worse-case scenarios — you might not have the same rights as some spouses to claim what the IRS calls Injured Spouse Relief.
Again, if the IRS gets very aggressive in it’s collection and you two can’t pay, whatever formal steps the IRS takes (like a lien) would wind up on both of your credit reports.
Bottom line: it’s always cleanest and safest to maintain separate accounts and separate tax filing status if you want to protect yourself as much as possible. But then again, I understand your desire to get a bigger tax refund — or to pay less in taxes. So you may decide that the risk of doing so is very small, or at least acceptable to you, given the reward you might reap.
Good luck with your decision!
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