Do I Owe Taxes for an Ex-Spouse?!

Dear Team,

I’m recently divorced and just received a letter from the IRS requesting a payment of taxes from two years ago, when my husband and I last filed together. Apparently, my husband found additional income that didn’t get reported in our return and it created a taxes owed situation. The IRS found it too.

I hadn’t heard of this additional income. They’re 1099s he did for his work, so I don’t know why I need to pay as well. 

Do I have any options? Is it possible to just pay half?

Thank you,

Confused 

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Dear Confused, 

It can be nerve wracking to receive a note from the IRS, particularly if they’re looking for money! Your situation is especially difficult in that you didn’t have anything to do with the income in the first place. 

Unfortunately, this is more common than you’d think. 

Under the IRS code, you and your ex-husband are equally liable for the full amount of tax due so the IRS will attempt to collect from both of you until it’s paid. If it’s not paid, the IRS has the ability to garnish both of your wages, take money from your bank account(s), or sell your assets to satisfy the debt. 

This is probably not a reassuring response but please read on because the story could have a happy ending for you!

Per the IRS, “When filing jointly, both taxpayers are jointly and severally liable for the tax and any additions to tax, interest, or penalties that arise from the joint return even if they later divorce. Joint and several liability means that each taxpayer is legally responsible for the entire liability. Thus, both spouses on a married filing jointly return are generally held responsible for all the tax due even if one spouse earned all the income or claimed improper deductions or credits. This is also true even if a divorce decree states that a former spouse will be responsible for any amounts due on previously filed joint returns. In some cases, however, a spouse can get relief from being jointly and severally liable.”

So, here’s the good news: You may be granted Innocent Spouse Relief by the IRS. Innocent Spouse Relief relieves you of the full or partial responsibility of paying tax, penalties, and interest if your spouse left items off your tax return intentionally or unintentionally if you qualify.

To qualify for this relief you must meet the following criteria:

  • The tax return was filed jointly and has an understatement of tax due to one spouse’s error. 
  • You were unaware at the time of the signed return that there was additional tax due.
  • It would be unfair to hold you liable if all the facts are taken into account.
  • You and your ex-husband have not transferred property between each other to commit fraud. 

If you meet the criteria, you should complete and file form 8857 for Innocent Spouse Relief. The IRS will make a determination on full, partial, or no relief. 

If the IRS letter says it’s a levy, be sure to contact them right away and stay on the phone until you’re able to talk to an IRS representative. If you have trouble reaching the IRS, you should consider enlisting the services of a tax attorney to help with this situation.

And remember, you can always give us a call for a little guidance!