Are You Liable for Your Ex's Tax Debts?

Are You Liable for Your Ex's Tax Debts?

• May 15, 2023

When going through a divorce or separation, finances can become a major source of stress and contention. Among the many issues that need to be resolved, taxes may not be the first thing on your mind. However, it's important to understand your tax obligations and potential liabilities, especially when it comes to your ex's tax debts. Are you liable for your ex’s tax debts? What factors impact your liability for debts accrued during your relationship? Keep reading to get the answers to these questions and learn how you can protect yourself.

Understanding Joint and Several Liability

The IRS generally holds both spouses jointly and severally liable for any tax debt that was incurred during the marriage, even if only one spouse earned the income or claimed the deductions. This means that both spouses are individually responsible for paying the full amount of the tax debt, regardless of who incurred it.

Even after a divorce or separation, if a joint return was filed during the marriage, both spouses remain jointly and severally liable for any tax debt related to that return. This includes penalties and interest that may have accrued over time.

The Innocent Spouse Relief Option

Fortunately, there are options available for spouses who find themselves in this situation. One of these options is the Innocent Spouse Relief program. This program allows a spouse to be relieved of joint and several liability for tax debt that was incurred during the marriage.

To qualify for Innocent Spouse Relief, the following conditions must be met:

1. The tax debt was incurred during the marriage.
2. The debt is the result of an error or omission made by the other spouse.
3. The spouse seeking relief did not know and had no reason to know about the error or omission at the time the return was filed.
4. It would be unfair to hold the spouse seeking relief liable for the tax debt.

If these conditions are met, the IRS may grant relief to the innocent spouse, allowing them to be relieved of the joint and several liability for the tax debt.

The Separation of Liability Option

Another option available to spouses is the Separation of Liability program. This program allows the tax debt to be allocated between the two spouses, based on their individual income and deductions.

To qualify for Separation of Liability relief, the following conditions must be met:

1. The spouses must have filed a joint return during the marriage.
2. The spouses must have been divorced, legally separated, or lived apart for at least 12 months before filing the request for relief.
3. The request for relief must be filed within 2 years of the date of the IRS's first collection activity on the tax debt.
4. The tax debt must be attributable to an item that was reported incorrectly on the joint return.
5. The requesting spouse must not have known or had reason to know about the error at the time the return was filed.

Under this program, the tax debt is allocated between the spouses based on their individual income and deductions. Each spouse is then responsible for paying their share of the tax debt.

The Equitable Relief Option

The third option available to spouses is Equitable Relief. This program is available when neither Innocent Spouse Relief nor Separation of Liability is applicable, but it would still be unfair to hold the requesting spouse responsible for the tax debt.

To qualify for Equitable Relief, the following conditions must be met:

1. The tax debt was incurred during the marriage or while the spouses were living together.
2. The requesting spouse did not know or have reason to know about the error or omission that resulted in the tax debt.
3. The requesting spouse would suffer an economic hardship if they were held liable for the tax debt.
4. It would be unfair to hold the requesting spouse liable for the tax debt.

If these conditions are met, the IRS may grant relief to the requesting spouse, allowing them to be relieved of the joint and several liability for the debt.

Learn More about Your Options

If you feel you are being held unfairly responsible for an ex’s tax debts, contact the IRS Advocates today. We can help you to explore your relief options and provide you with a better understanding of what your liability is for the taxes accrued during your marriage. Call now to schedule a consultation with one of our tax debt relief experts.