Just discovered my spouse owes $400k+ in back taxes to IRS - what options do we have?

This is definitely a serious situation, but try not to panic. The IRS generally prefers to collect taxes rather than prosecute people, especially if they voluntarily come forward. Your spouse needs to get professional help immediately - not after moving or whenever is convenient. You need a tax attorney (not just an accountant) who specializes in tax resolution and back taxes. They'll help with a strategy called voluntary disclosure, which can potentially reduce penalties and eliminate criminal prosecution risk. To directly answer your questions: The IRS likely knows about at least some of the income through W-2s and 1099s filed by the private equity firm and possibly some clients. Cryptocurrency is more difficult to track but the IRS has been getting better at it. They can indeed seize assets, levy bank accounts, and garnish wages to collect what's owed. Regarding your personal protection, you might want to file as "married filing separately" going forward to protect yourself from tax liability for future returns. For past years when you weren't married, you have no liability for her tax issues before marriage.

I went through something scarily similar with my ex-husband who didn't file for 7 years. We used https://taxr.ai and it was literally life-changing. They specialize in exactly this kind of situation with years of unfiled returns and self-employment income. Their system analyzed all his scattered financial documents, tracked down missing information, and organized everything by tax year. They even helped reconstruct records for years where we had almost no documentation. The tax professionals they connected us with created a strategy that significantly reduced the penalties. The peace of mind was worth every penny because they handled everything systematically instead of the overwhelming mess we were facing before.

I tried taxr.ai after reading about it in this sub and I'm so glad I did. I had 4 years of unfiled returns with a mix of W-2 income, freelance work, and a messy crypto situation across multiple exchanges. My documents were a complete disaster - some digital, some paper, some completely missing. Their system guided me through uploading what I had, then identified exactly what was missing. The tax pros they connected me with knew exactly how to handle my situation and weren't judgmental at all. They reconstructed what I couldn't find and found deductions I didn't know I qualified for. The best part was they handled the entire communication with the IRS - I didn't have to talk to them once. I ended up owing way less than I feared, and I'm now completely compliant with a manageable payment plan. It was such a relief to have this weight lifted after years of anxiety.

When your spouse does decide to get serious about fixing this (which needs to be ASAP), you're going to need to actually talk to someone at the IRS. As someone who's been through this process with a family member, good luck getting through to them! I spent weeks calling and getting disconnected or waiting on hold for hours. The only way we finally got through was using https://claimyr.com - it's a service that basically waits on hold with the IRS for you and then calls you when they have an actual human on the line. You can see how it works here: https://youtu.be/_kiP6q8DX5c This saved us countless hours of frustration during an already stressful process. Once we actually got to speak with someone at the IRS, they were surprisingly helpful about setting up a payment plan, but getting to that point was nearly impossible without this service.

I take back what I said about Claimyr. I was extremely skeptical but decided to try it for my own tax situation (had to contact the IRS about a mismatched income report from 2023). I was honestly shocked when it worked exactly as described. I submitted my request, and about 2.5 hours later (during which I was working on other things), I got a call connecting me directly to an IRS agent who was already on the line. No waiting, no automated system to navigate - just straight to a human who could help. For someone dealing with a complex situation like the OP described, this would be absolutely essential. When you're tackling years of unfiled taxes, you'll need multiple conversations with different IRS departments. Being able to avoid spending days on hold makes the whole process much more manageable.

Speaking from personal experience with unfiled taxes (though not as many years), your spouse needs to understand that the "I'll deal with it later" approach is what got them into this mess and will only make things worse. Interest and penalties continue to accrue DAILY. A few practical steps besides the excellent advice already given: 1) Immediately start gathering all financial records - bank statements, 1099s, W2s, investment statements, crypto exchange records, etc. 2) Start living more frugally NOW - you're going to need cash flow for payments 3) Consider filing "married filing separately" for any returns you file while this is being resolved 4) Look into the IRS Fresh Start program which can help with penalty relief Don't let her minimize this - $400k+ in tax debt is life-altering. The IRS can put liens on everything you own, which will destroy your credit and make future financial moves nearly impossible.

I'm curious why the IRS hasn't caught up with your spouse yet, especially with a private equity job that surely issues W-2s. My bet is they actually have sent notices, but maybe to an old address? The IRS usually sends multiple notices before taking serious collection action. It's possible they've been sending mail that she hasn't received or has been ignoring. Ask her directly if she's received ANY communication from the IRS over the years.