IRS notices can be especially stressful during separation or divorce, particularly when one spouse handled the tax filings, business income, or payments. If you filed joint tax returns, the IRS may look to both spouses for the tax, penalties, and interest owed. However, depending on the facts, spouse relief may be available.
Reader Question
I’m currently separated from my spouse, who owns a business, and we are in the middle of a divorce. We always filed jointly, and now the IRS is sending notices stating that I owe $87,000. I do not understand how they calculated this amount because my spouse always handled paying the IRS. What can I do?
Why Joint Tax Debt Can Affect Both Spouses
When spouses file a joint federal income tax return, both spouses are generally responsible for the tax shown on the return, as well as any additional tax, penalties, and interest that may later be assessed. This can be true even if one spouse earned most of the income, handled the business, or agreed in a divorce decree to pay the tax.
What Is Innocent Spouse Relief?
Innocent spouse relief may help a taxpayer avoid responsibility for additional tax caused by certain errors or understatements attributable to the other spouse. This may involve unreported income, improper deductions, incorrect credits, or other items that caused the tax on the return to be understated.
To qualify, the IRS generally looks at whether a joint return was filed, whether the tax was understated because of the other spouse’s items, whether the requesting spouse knew or had reason to know about the issue, and whether it would be unfair to hold that person responsible.
What If the Tax Was Reported Correctly but Not Paid?
Some cases are not about hidden income or incorrect deductions. Sometimes the return was filed correctly, but the tax was not paid. In that situation, equitable relief may be the more relevant type of spouse relief. Equitable relief considers whether, based on the facts and circumstances, it would be unfair to hold the requesting spouse responsible for the unpaid tax.
Why the Facts Matter
Spouse relief cases are very fact-specific. The IRS may consider factors such as marital status, financial hardship, knowledge of the tax issue, abuse or control, who handled the finances, whether there was a benefit from the unpaid tax, and whether the requesting spouse made a timely request for relief.
Documentation can be important. Notices, tax returns, divorce documents, bank records, business records, and communications about the tax issue may help explain what happened and which relief options may apply.
What Should You Do Next?
If you are receiving IRS notices related to joint tax debt during separation or divorce, do not assume you have no options. The first step is to review the tax years involved, how the balance was created, whether the tax was understated or unpaid, and whether innocent spouse relief, separation of liability relief, or equitable relief may be available.
TR360 helps taxpayers review IRS notices, understand spouse-related tax liability, and determine what information may be needed before requesting relief from the IRS.