Will I Be Responsible for My Spouse’s Tax Debts After a Gray Divorce?

 Posted on March 26, 2021 in Divorce

When getting divorced later in life, you may encounter a variety of financial issues related to your marital home, your retirement savings, or other parts of your life. In addition to determining how to divide your marital assets, you should also be aware of the tax consequences of the decisions you make during your divorce. Unfortunately, even if you believe that you have addressed these matters properly, tax debts are an issue that may come up after your divorce is finalized. In these cases, you will want to understand your options and determine whether you qualify for relief from your spouse’s tax debts.

IRS Tax Liabilities and Innocent Spouse Relief

Even if your divorce settlement or judgment specified that your spouse would be responsible for paying tax debts, the IRS may still take action to collect money from both of you. If you and your spouse filed joint tax returns, and the IRS determines that you owe taxes based on errors or misreported information, both of you will be equally liable for paying the amount owed.

Fortunately, there are options available for relief from these tax debts. You may qualify for innocent spouse relief if your spouse was solely responsible for any errors on a joint tax return, such as misreporting income or claiming improper deductions on tax credits. You will need to show that when you signed the joint tax return in question, you did not know or could not have reasonably known about the errors. If the IRS determines that it would not be fair to require you to pay for your spouse’s errors, you may be granted relief from the requirement to pay these debts.

If the IRS determines that you do not qualify for innocent spouse relief, other forms of relief may be available. Separation of liability relief will allocate the amount owed between you and your ex-spouse, and if you qualify, you may only be required to pay a certain amount of the total tax debt based on the income you earn and the financial resources you have available to you. 

If you do not meet the qualifications for separation of liability relief, you may be able to receive equitable relief if other circumstances would make it unfair or unreasonable for you to be held liable for tax debts. For example, if you have fully paid off your home and are on a fixed income, the requirement to pay tax debts could result in the loss of your home, leaving you in an unstable living situation. To avoid placing you in an impossible financial situation in your elder years, the IRS may grant you relief from the requirement to pay these tax debts.

Contact Our DuPage County Divorce Tax Debt Lawyers

By addressing tax issues properly during your divorce, you can avoid unexpected surprises in the years to come, and you can make sure you will have the financial resources you need to support yourself. At Goostree Law Group, we can help you understand the best ways to address these concerns, and we will work with you to negotiate a divorce settlement that will meet your needs. Contact our Naperville gray divorce attorneys at 630-634-5050 to arrange a free consultation today.

Sources:

https://www.irs.gov/taxtopics/tc205

https://www.irs.gov/businesses/small-businesses-self-employed/innocent-spouse-relief