Am I Liable for My Spouse’s Unpaid Taxes?

Many married couples choose to file their taxes jointly, as it confers extra tax benefits. Taxes are complicated, though, and mistakes can be made, leading to back taxes and penalties owed to the internal revenue service. In some situations, a spouse may be able to get relief from back tax and penalty debts owed, even if the spouses filed jointly.

The IRS provides an exception called the "innocent spouse exception." If a spouse qualifies for this type of relief, he or she may not be liable for a tax debt, even if he or she filed taxes jointly with the spouse. To qualify for innocent spouse relief, the spouse must first prove that the joint tax return is wrong due to a mistake attributable to the other spouse, such as an underreporting the spouse’s income or inaccurately reporting deductions. The innocent spouse must also demonstrate that he or she did not know and had no reason to know of the incorrect information being reported to the IRS. In other words, a spouse cannot claim innocence just because he or she did not read the tax return before it was submitted. Finally, the spouse must show it would be unfair to force him or her to be liable for the tax debt.

Divorced spouses have another type of relief potentially available. It is called separation of liability. In this situation, a spouse claiming he or she should not be liable for the debt resulting from incorrect taxes must be divorced from the person with whom he or she filed the joint return. Like innocent spouse relief, it is also necessary that the spouse claiming relief not have knowledge that the taxes were underestimated at the time the return was filed.

Spouses preparing for divorce should keep these issues in mind. If a spouse has concerns about potential tax liability, it may be advisable to include a clause in any divorce settlement that provides who will be responsible for any back taxes or penalties that may be assessed in the future for joint returns.

Taxes and divorce interact in difficult and complex ways. We have helped many clients understand their case and their potential tax liabilities within the framework of their divorce.