Dear Chicago Tax Lawyer,
I am in the midst of a divorce and have some tax-related questions. Specifically, I’m worried about $10,000 in back tax debt still owed by my soon-to-be ex husband. During our marriage, we filed taxes jointly. So my question is: When we divorce, will I still be responsible for that debt? Please help!
Soon-to-be-Single in Illinois
First off, we’re sorry to hear about your separation.
As for the divorce tax question regarding your soon-to-be ex’s outstanding debt: You may be able to apply and receive an “innocent spouse” dispensation from the Internal Revenue Service.
If, when married, you filed a joint tax return with your spouse, then you’re both jointly and severally liable for the tax debt. In other words: The IRS can collect from either of you, in full, for the debt. Innocent spouse provides an alternative.
How Does An Innocent Spouse Dispensation Work?
Innocent spouse agreements free qualified parties from former partners’ tax debts. Under the right circumstances, taxpayers can get back taxes, interests, and penalties that are generated by estranged- or ex-spouses expunged from their records.
However, not everyone qualifies. In fact, the IRS has rather strict guidelines.
For example, let’s say your estranged partner lied on previous tax returns, which led to increased tax debt. If auditors or investigators discover that you advised your then-partner to prevaricate, then authorities aren’t likely to extend doubt’s benefit your way. Same applies if evidence surfaces that you somehow supported the deception.
However, if you can convince authorities that you had precious little to do with your spouse’s debt woes, you’ll likely be able to negotiate a settlement that absolves you from remittance responsibilities.
Divorce Tax Debt Relief Options
What options exist for people looking to escape tax debt racked up by estranged or ex-spouses?
- Innocent Spouse Relief: This option provides relief if your spouse or former spouse failed to report income, reported improperly, or claimed incorrect deductions or credits.
- Separation of Liability Relief: This option allows you to split tax debts arising from past inaccurate tax items owed by you and your estranged spouse with whom you don’t currently live. Using this method means authorities will hold you responsible for the amount of tax allocated to you, but not the portion allocated to your former partner.
- Equitable Relief: This option can apply when you don’t qualify for innocent spouse relief or separation of liability relief if your spouse improperly reported a line item. You may also be eligible for equitable relief if the amount of tax reported is correct on a joint return but hasn’t yet been paid.
If you’re dealing with divorce tax matters, the best thing to do is work with a tax settlement attorney. He or she can assess your specific situation and offer the best advice based on the details. Our team, the Gordon Law Group, has helped countless individuals with various personal and divorce tax settlements and negotiations. We are detail-oriented, creative legal thinkers with a knack for crafting ideal solutions.
The Gordon Law Group
About The Gordon Law Group
Gordon Law is a Chicago tax firm that helps with everything from divorce tax matters to business tax positioning. If you need help with any sort of tax conflict, we’re here to help.
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