Historically, tax issues arising from bad marriages fell into the
category of “better or worse” for marriages. The IRS granted no
innocent spouse tax relief, but has changed its views.
Tax Relief
When a marriage has problems, finances are almost always one of the
elements that contribute to the strife. This can be particularly true
where spouses file a joint tax return, which the both sign as tax
payers. If the information provided on the tax return is false or
inaccurate, the IRS has historically viewed both spouses as liable for
the resulting assessments. If the relevant taxes were not paid, the IRS
would also look to both spouses to pay the delinquent amount. In worse
case scenarios, this can include criminal charges for tax evasion.
Fortunately, the IRS has modified its view of the liability of joint
filers. The IRS now recognizes that innocent spouses can’t control
their deadbeat former spouses. It allows such innocent spouses to claim
three types of tax relief:
1. Innocent Spouse Relief
2. Relief by Separation of Liability
3. Equitable Relief
If the IRS comes after you for the tax liability of a former spouse,
you can seek tax relief under these three theories if you meet all the
following requirements. First, you filed a joint return with inaccurate
information. Second, you didn’t know of the inaccuracies and didn’t
have any reason to. Finally, taking into consideration the situation,
holding you liable for the tax would be unfair.
The IRS will evaluate your application and render a ruling on your
application. The IRS may agree to simply waive any tax claim against
you and go after the deadbeat spouse as the sole debtor. Alternatively,
the IRS may split the tax into a his and her account, only requiring
you to pay one half of the amount due. While this may not sound great,
it will immediately cut your tax bill in half.
In rare cases, you can seek equitable relief from the IRS. Equitable
relief simply is another way of saying making you pay the tax would be
manifestly unfair. You must show you and the spouse did not transfer
assets as part of an fraudulent scheme, didn’t transfer assets with the
intention of evading taxes, didn’t intend to commit fraud, didn’t pay
the taxes due and you didn’t know what your spouse was up to. Equitable
relief claims need to be handled very carefully as the IRS views them
with a very cynical eye. Nonetheless, they are a last step that can be
taken when all else has failed.
