When you file a joint tax return with your ex-spouse, you are jointly and severally liable for any unpaid taxes. The same is true if your spouse gets audited for a tax year when you were still married.
But what if you aren’t responsible for the entire tax liability? To be clear: the IRS should not hold you liable for your ex-spouse’s debts unless the agency can demonstrate that you benefitted from those taxes deducted from your salary or income.
Relief from liability may be available in these situations, with three kinds to help eligible divorced taxpayers get off the hook: Innocent spouse relief, equitable relief, or separation of liability relief.
Innocent Spouse Relief
If you are divorcing and have been relieved of liability before the divorce judgment, you may apply for innocent spouse relief if you meet any of the following conditions:
- You are not guilty of fraud.
- You did not willingly and knowingly fail to report your spouse’s income.
- You did not willingly and knowingly file a joint return.
Equitable Relief
Suppose you did not qualify for innocent spouse relief, and your divorce hasn’t been finalized. You may still get equitable relief instead, which is a streamlined process for innocent spouse relief. You may apply for equitable relief if you meet the following conditions:
- You paid all or part of the tax due.
- There was an understatement of tax on the joint return.
- There was no tax due at all, but you filed a joint return anyway.
- You didn’t file or sign the joint return.
- The IRS determines that it would not be unfair to relieve you of the tax.
- You didn’t willfully or criminally participate with your spouse in underpaying taxes.
Even if you meet the conditions above, you may not be eligible for equitable relief if any of the following are true:
- You were divorced or legally separated when you signed the joint tax return.
- A criminal proceeding or civil claim involving tax fraud is pending against you.
- You have previously been relieved of tax penalties and are not currently liable for the same tax period.
Separation of Liability Relief
When you meet all of the following conditions, you may qualify for separation of liability relief:
- The IRS assesses you for a tax year during or after your divorce.
- You filed as married on all tax returns during the year.
- Your spouse is deceased or legally separated from you.
- You did not sign the tax return or didn’t know and had no way to know about the understatement of tax on the return.
- Your spouse committed fraud in the tax year under audit.
- You did not willfully participate with your spouse in any part of preparing the tax return or understatement of tax.
- You were serving under a Power of Attorney for your spouse and did not sign the return.
- The IRS determines that it would not be unfair to relieve you of the tax.
You cannot get relief from liability for a tax year if you knew or had reason to learn of any item on the tax return that gave rise to the tax, other than a traditional IRA deduction.
Conclusion
Innocent spouse relief is only applicable if you qualify for the given criteria. Equitable relief is an alternative to innocent spouse relief, while separation of liability relief is a federal form that you must file with the IRS. This separation of liability form is often used to request a collection due process hearing with the IRS if you believe that you have been assessed for taxes for which you should not be held liable.
Regardless of the type of relief you qualify for, if you are dealing with tax issues from a divorce, you must be aware of them and understand the rules.
Do you need tax relief solutions? Trust Axiom Tax Resolution Group in Birmingham. Our experienced tax professionals can help you find permanent solutions to your tax issues with the IRS. Contact us now.
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