Depending on any number of specific circumstances, most married couples enjoy a number of benefits by filing joint tax returns during their marriages. However, when two spouses sign a joint return, the Internal Revenue Service (IRS) generally views them as being equally liable for full tax payment. This is known as joint and several liability, and it is generally not an issue for spouses — unless they divorce after filing taxes jointly.
How Joint and Several Liability Works
Regardless of the employment status of each spouse in a marriage, they can generally file joint returns that double individual deductions while qualifying for certain tax credits, beyond qualifying income thresholds for an individual taxpayer. When couples file jointly, however, the IRS views each filer as having full responsibility for paying all taxes that are due.
Joint and several liability can become a major issue after divorce, particularly when one ex-spouse is found to have falsified information or simply failed to pay the full tax amount when it was due before the couple divorced. This is when the IRS has the right to pursue payment from the other spouse, even if he or she was not aware of the falsifications or lack of full payment.
Clearly, joint and several liability can often create devastating financial hardships for an ex-spouse who is struggling to start a new post-divorce life.
Three Forms of Tax Relief Can Potentially Reduce Tax Liability for Innocent Ex-Spouses
In a perfect world, no one would ever sign a tax return without having a full understanding of every number it contains. When dealing with complex tax returns, however, full understanding is often impossible, which means that assumptions of joint and several liability are not always fair.
This is why the IRS permits divorced or separated spouses the option of essentially requesting some degree of exemption from the joint and several liability assumption via the following three forms of relief:
- Innocent spouse relief: After separation or divorce, when the IRS discovers that a spouse under-reported income on a prior joint return by failing to report, reporting improperly or claiming improper deductions or credits, the other ex-spouse who signed the return without knowledge of the falsifications may be able to seek relief from the additional taxes due.
- Separation of liability relief: If taxpayers filed a joint return prior to divorce or separation, they may be eligible to ask for this type of relief in the event that the other filer underreports tax liability — as long as the requestor has not also benefited by the error.
- Equitable relief: Even when they do not qualify for the other two types of relief, it may still be possible to request that spouses not be held liable for underpaid taxes based on all facts and circumstances surrounding the case.
Of course, the IRS places a number of strict qualification rules that filers must meet before it will grant requested relief. This is why it is so important for divorced spouses to seek immediate legal support when they receive unexpected tax due notices from the IRS. Call one of our Minnesota divorce lawyers at 763-323-6555 or use our convenient contact form for advice and support when facing complex post-divorce tax issues.