I settled and wrote-off a major debt. This was recorded as 1099-E income. I incurred all of this debt under my name only, and she was not my spouse at the time I got into the debt. She was my spouse when I settled the debt.

The write-off income was able to be cancelled under a federal program, due to our total balances of finances.

Does my spouse have exposure?
Does the matter remain on her record in any way, or impact her credit?

She has excellent credit now, and we would like to keep it that way.

Overall we want to understand possible future impacts for a joint filing.

( Our accountant doesn't know the range of potentials here, I think, as they avoid answering the question. I know that is not a good trust relationship, and it certainly will weigh into our choices of a CPA next year. )

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    Was she a cosigner on the original debt? – JTP - Apologise to Monica Apr 14 '14 at 1:38
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    If you and your spouse file a joint income tax return, then you and she are jointly and severally liable for the taxes due. If you fail to pay the tax due and run off to Tahiti, she is liable for all the unpaid tax including the tax on whatever income has "come your way" as settlement of the debt. So yes, she has exposure to your activities in writing off the debt as far as the tax situation is concerned. As far as credit rating is concerned, that depends on your answer to JoeTaxpayer's question. – Dilip Sarwate Apr 14 '14 at 2:27
  • @JoeTaxpayer no. I edited the question. I would like to know the potential impacts to her (credit aside) - e.g. possible future scenarios in which she could be burdened. I will have the burden regardless because all the debt was on my shoulders, but I want to protect her as much as possible. – New Alexandria Apr 14 '14 at 2:53
  • @NewAlexandria protect from what? What impact are you asking about? – littleadv Apr 14 '14 at 3:01
  • If I knew what kinds of risks could occur from a joint filing in this situation, I would not have needed to ask here. I hope that gives you a sense of the breadth of uncertainly I'm asking about. thanks – New Alexandria Apr 14 '14 at 3:08

For purposes of your question, a separate return would only be advised if you are breaking the law. Any spouse not 100% comfortable that the return is an accurate one should opt to file separately.

It appears your concern is more about credit scores and for that, your comment and edit stating that she was not on the accounts means she should not have this show on her report.

I suggest you each pull a current credit report (I will edit in a link tonight), which is free and should not be asking for a credit card. Legally you get one from each of the big three agencies each year. Next both sign in to CreditKarma.com for a credit score, also free, and a good way to watch for any risky things on your accounts.

You are wise to be concerned, but given what you said, your wife should not be impacted .

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