Tax debt can be divided up between the spouses just like other assets and debts in a divorce. However, it’s important to realize that the IRS does not need to comply with your divorce decree when seeking payment of back taxes from a joint tax return.
The doctrine of joint and several liability allows the IRS to go after either or both spouses for the full amount of your joint tax debt—no matter what your divorce settlement says. Keep this in mind during your divorce negotiations.
Joint vs. Separate Tax Debt
Joint and several liability only applies to joint tax debt. If you or your former spouse has tax debt that accrued before the marriage, it will continue to be the responsibility of that spouse.
You can’t use the “Single” or “Head of Household” filing status until your divorce is finalized. During the separation or divorce process, you may want to use the “Married Filing Separately” status to avoid any potential liability for your spouse’s tax items or errors.
Separate returns are the responsibility of each spouse individually, and the IRS can’t come after your for debt related to your spouse’s separate return.
Innocent Spouse Relief
Even if your divorce settlement divides up your tax debt or assigns it entirely to your spouse, you may want to consider claiming innocent spouse relief. If your request is granted, this is a legal apportionment of the debt that the IRS will comply with.
There are three types of innocent spouse relief, and you could be eligible for one or more of these tax debt relief options. Separation of liability relief is available to divorced or separated couples with joint tax debt. Essentially, your joint tax debt is converted into separate tax debt by allocating the items on the tax return between the spouses.
There are two important limitations to separation of liability relief:
- You need to request this relief within two years from the date the IRS first tried to collect from you.
- It only applies to items that were improperly reported on a tax return.
If your tax return was filed properly, but you just couldn’t pay the amount due, you can’t use separation of liability relief. However, equitable relief can be used for unpaid taxes that were properly reported on your return (if you meet all the other requirements).
Consult a tax attorney to determine the best way to handle your tax debt during your separation or divorce.
The Gartzman Law Firm offers tax settlement help for both federal and state tax debt, including innocent spouse relief requests. Use our contact form to request a consultation with an Atlanta tax resolution attorney.