IRS Debt And Divorce: Who Pays Back Taxes? – Tony Ramos Law (2024)

The court assigned your spouse responsible for most of the joint IRS debt.
Today, you get a notice from the IRS demanding payment for taxes your spouse is responsible for.You just want to get on with your life!
You may be asking "Who is responsible for IRS debt?". And "does it matter what the divorce decree states regarding who is responsible?"

Here is what you should know.

Your divorce decree does not bind creditors. The divorce decree assigns responsibility between the divorced parties for debts. That responsibility is binding. When your spouse doesn’t live up to their obligations as per the divorce decree there are remedies. However, as a general rule the divorce decree does not bind creditors, including the IRS.

You will be liable after divorce if you were liable to the IRS for tax debt before divorce.
That said, the court can make your ex-spouse responsible which is enforceable through the courts. The IRS can still come after you.

What Can You Do About Tax Debt After Divorce?

Joint and several liability.

If you filed tax returns jointly when married, both spouses are liable to the IRS. That means they can collect 100% of the debt (tax, penalties, and interest) from either spouse. This is true after divorce, even if the spouse that is obligated per the divorce decree, fails to pay.

When you file joint tax returns when married, both taxpayers are jointly and severally liable for the tax, penalties and interest. Divorce does not eliminate each party’s responsibility to the IRS. There are some types of relief available from this joint and several liability. Besides enforcing obligations stated in the divorce decree through your family court, you can also apply with the IRS for relief.

Here are three possible actions to limit tax debt for the non-responsible spouse:

(see at IRS website www.irs.gov/taxtopics/tc205)

• Your joint return has an understatement of taxthat’s solely attributable to your spouse’s erroneous item. Such as income received by your spouse but omitted from the joint return. Also included as erroneous items are deductions, credits, and property basis if incorrectly reported on the joint return.
• You didn’t know, and had no reason to know, that there was an understatement of tax when you signed the joint return.
• Taking into account all the facts and circ*mstances, itwould be unfair to hold you liablefor the understatement of tax.

As set out in your divorce decree, assignment of tax responsibility does not bound the the IRS. Even so, the decree could help you demonstrate to the IRS certain factors they consider.

These factors include:

• Abuse,
• Knowledge of whether taxes were properly reported or
• Knowledge as to whether or not they were paid. And
• To what extent you did or did not benefit from the unpaid taxes.

It may be a good idea to have your divorce attorney consult with a knowledgeable tax relief attorney when negotiating your divorce settlement.

You must apply for Innocent Spouse Relief within two years after the date that the IRS first attempted to collect tax from you.

You can possibly get a different allocation of tax debt for an item that was not properly reported on a joint return.
To qualify for this relief you must meet one of the following requirements. You:

• are divorced or legally separated from the spouse with whom you filed the joint return
• are widowed, or
• haven’t been a member of the same household as the spouse with whom you filed the joint return. This is for any time during the 12-month period ending on the date you request relief

You won’t qualify for separation of liability relief if:

If you knew about the item that led to the understatement of tax when you signed the joint return.

You must apply for Separation of Liability Relief within two years after the date that the IRS first attempted to collect tax from you.

• Current marital status
• Reasonable belief of the requesting spouse when they signed the return, that the tax was going to be paid. Or in the case of an understatement, whether the requesting spouse knew or had reason to know of the understatement
• Current financial hardship/inability to pay basic living expenses
• Spouses’ legal obligation to pay the tax liability pursuant to a divorce decree or agreement to pay the liability
• To whom the liability is attributable
• Significant benefit received by the requesting spouse
• Mental or physical health of the requesting spouse on the date the requesting spouse signed the return. Or at the time the requesting spouse requested the relief
• Compliance with income tax laws following the taxable year or years to which the request for relief relates
• Abuse experienced during the marriage.

If you’re looking for a refund of tax you paid you must request it within the refund statute period.
This period is generally three years after the date the return is filed. That, or two years following the payment of the tax, whichever is later.

Community Property States – When you lived in a community property state and did not file as married filing jointly. You might qualify for relief from the operation of state community property law.

Are you are separated or divorced and don’t think it's fair the IRS is making you responsible for your spouse’s taxes? Want to know what you can do about it? Schedule your Free IRS Innocent Spouse Relief Consultation now.