Back Taxes and Divorce

On: April 15, 2018

My husband handles our tax returns. I learned that we owe close to $40k in back taxes. I’m leaving him for this and other reasons. Will that tax bill follow me? What can I do?

The following assumes that the husband filed “Married Filing Joint.” This requires that both spouses sign the return. If you signed the return, it is assumed that you have read and understood the return and agree to its accuracy. If you filed “Married, Filing Separately”, the following does not apply to you.

If you do not contest the tax bill, the tax liability will follow you. Both you and you ex-husband will be equally liable for the entire $40,000 until it is paid in full. This is called “Joint and Severable Liability.” Divorce courts will often apportion the tax liability to one party or the other as part of the divorce settlement. The IRS does not care. It will continue to go after both parties and they will be required to sue each other again to enforce the original court decree outside of the IRS jurisdiction.

If you are contesting your liability of this $40,000 of back tax liability, you are considering “Innocent Spouse Relief.” Under this scenario, you must be able to prove that you were unaware of the tax liability, the income that generated the tax liability and that you derived no benefit from this income. Examples of this are as follow:

Ex#1 – The husband makes unreported income (“on the side”), does not deposit it in the couple’s joint account, does not report on their joint return and does not use this money in a way that benefits the wife. The IRS finds out about it later and taxes the couple jointly for it.

Ex#2 – The husband had a company that had payroll tax problems. The company went out of business and the IRS assessed the payroll liabilities against the husband personally years after the couple originally filed their joint return. The liability shows up as joint because the couple had originally filed a joint return. The wife never knew about this, it was not reported on the joint return and she did not benefit from it in any way.

A Claim for Innocent Spouse Relief is requested using form 843. It is an eight page application requiring substantial backup documentation. It is filed and signed by the innocent spouse.

Additional avenues of relief are Claims for Injured Spouse Relief (when a spouse walks into a marital relationship with a tax liability that harms the other spouse) and a Claim for Equitable Relief (when a claim is for a percentage of one the other two claims or the borders are not clear or applicable).