Are You Responsible for Your Former Spouse's Tax Debt?

Before your divorce, filing your tax returns as a married couple may have come with a lot of benefits. However, the Internal Revenue Service (IRS) can hold both spouses jointly and severally liable for the full amount of unpaid taxes, penalties and interest associated with the tax years you filed jointly.

Unpleasant debt issues may arise during your divorce. But one of the most unnerving — and possibly unanticipated — issues is that you could owe taxes on your spouse’s former income. If your spouse made errors or dodged taxes during your marriage, you may be held responsible even years down the road, despite your separation or divorce.

You can negotiate tax liability, as you can with any other type of debt, during your divorce settlement proceedings. However, creditors are third parties and are not held to the agreement you make with your spouse. In other words, the IRS has no obligation to abide by an agreement that holds your spouse solely liable for all unpaid taxes, penalties and interest. The IRS can and likely will go after both of you. Although contractual language does give you a cause of action against your spouse, you may nonetheless end up paying for your spouse’s mistakes unless you carefully orchestrate your settlement and deal with the IRS directly.

The IRS recognizes the following three forms of relief to an innocent spouse:

  • Innocent spouse relief absolves you of tax liability for payment of back taxes, interest and penalties associated with a mistake your spouse made on your tax returns. You must show that you did not and should not have known about the error your spouse made on your returns.
  • Relief by separation of liability allows you to divide the back taxes, interest and penalties on taxes owed on your joint return. You are, therefore, only liable for the amount of taxes allocated to you by the IRS.
  • Equitable relief grants relief even if you do not qualify for innocent spouse relief or separation of liability. The IRS may determine that to hold you responsible simply would not be fair and would be an undue burden to you.

As an alternative to obtaining formal relief from the IRS, your Tampa Bay divorce lawyer may suggest negotiating an agreement whereby your ex-spouse contributes disputed tax money into an escrow account until the matter is fairly resolved.