One of the main thoughts someone has while going through a divorce is “Who gets what?” Many married taxpayers choose to file a joint tax return because of certain benefits this filing status allows. Both taxpayers are jointly and individually responsible for the tax and any interest or penalty due on the joint return even after the divorce. This is true even if a divorce ruling states that a former spouse will be responsible for any amounts due on previously filed joint returns. It’s important to know the rules because one spouse may be held responsible for all the tax due even if the other spouse earned all the income. In some cases, a spouse will be relieved of the tax, interest, and penalties on a joint tax return. The three types of reliefs are listed below.
Innocent spouse relief:Innocent spouse relief is a document published by the Internal Revenue Service (IRS) that outlines the three types of tax liability relief for spouses or former spouses who filed joint income tax returns. A request for innocent spouse relief will not be granted if the IRS proves that you and your former spouse transferred property to one another as part of a fraudulent scheme. A fraudulent scheme includes a scheme to deceive the IRS or another third party.
Separation of liability:Separation of liability is an option if the income tax debt is a result of a joint audit or joint-filed original tax return. Commissioner filed returns (CFRs) are not eligible for a separation of liability. Also, the debtor must have a final divorce decree, legal separation papers or a death certificate. If the divorce is still in progress, the debtor does not qualify for separation of liability.
Equitable relief: When a court awards a nonmonetary judgment, such as an order to do something (mandamus or specific performance) or refrain from doing something (injunction), when monetary damages are not sufficient to repair the injury.
At Scott Levine, we are aware this information may seem overwhelming. We are more than happy to answer any questions you may have. We can’t stress enough how important it is to keep an open communication with your attorney during the divorce process. Contact us today if you have questions about any of these reliefs.
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