Similar to with other types of debt, taxes owed will likely be divvied up in the divorce. But even if they aren’t, if the couple filed a joint return, the Internal Revenue Service will hold each spouse jointly and individually responsible for any taxes, interest, and penalties due for the tax year ending before the divorce … even if the divorce decree states that one spouse will be responsible for any back taxes owed.
The IRS offers three types of exceptions/relief from joint liability: innocent spouse relief, separation of liability, and equitable relief. (Note: Those in community property states may qualify for specific types of relief under different procedures; see www.irs.gov for specific information.) Additionally, a spouse who filed a joint return and had all of his or her overpayment channeled toward the other spouse’s past-due debts (tax or nontax) may qualify for a refund as an “injured spouse.”
Innocent spouse relief covers someone who didn’t know his or her spouse was improperly reporting taxes owed. Separation of liability divides taxes owed between the spouses, usually by looking at which spouse owes what. Equitable relief may be used to eliminate tax debts owed for those who didn’t qualify for innocent spouse relief, separation of liability, or community property law relief but who fall into very specific categories of circumstances. More information is available in Publication 971.
Although the requirements for each type of relief are different, the person requesting relief must file Form 8857. An individual may apply for relief no matter how small the amount of taxes owed.
Photo credit: Tax Credits