When are you obligated to pay your former spouse’s taxes? Tax Matters by David A. Katzman If you were recently divorced, it may come as a surprise to learn that past tax liabilities may follow both you and your former spouse. This is because taxpayers who file jointly may be individually liable for any outstanding federal income taxes, even if their marriage has been dissolved or will be dissolved. However, there are instances where the Internal Revenue Service (IRS) allows one party to seek relief from these obligations. Generally, you must qualify under the “innocent spouse” provision or you must apply to limit your liability for taxes to the amount attributable solely to your own income, credits and deductions. Both of these options have specific requirements, as outlined by the IRS, which makes their use too restrictive for some taxpayers to benefit. For example, to qualify for innocent spouse relief you must prove a variety of factors, such as the taxes owed belong to the other party, you thought your spouse paid the taxes, the tax amount was changed due to an audit of which you were unaware or several other specific factors. If the IRS determines that you do not qualify for either form of relief, however, you may still be eligible for one final form of relief. This is referred to as “equitable relief” and it is available only if the other two options do not apply. Equitable relief—which could eliminate liability for taxes, interest, and penalties—allows the IRS to grant either full or partial relief based on your personal circumstances. Equitable relief is available for taxpayers who either have understated their taxes or have underpaid them. An understatement means there is a difference between the amount of taxes you reported owing and the amount you actually owed. Underpayment is when taxes were properly reported but all or a portion of the amount owed went unpaid. There are numerous requirements that must be met to qualify for equitable relief, and it is up to the IRS to determine if you qualify. Generally, the conditions relate to the fairness of holding you responsible for the taxes. For example, you may qualify for relief if you can prove that you paid your share of the taxes to your spouse but the money was, unbeknownst to you, used for other purposes. You are not required to meet all of the conditions outlined by the IRS in order to be eligible for equitable relief. Instead, the IRS weighs the total of your personal circumstances to determine if equitable relief will be granted. In making its determination, the IRS heavily weighs whether you had reason to know of any default. This means your education level and your degree of involvement in the activity generating the tax liability plays a role. The level of deceit that may have been involved on the part of your spouse could also be a determining factor. Additionally, the IRS often considers whether you have properly filed taxes since your divorce or separation. If your unpaid taxes are due to fraud or based on efforts to avoid taxes, you will not be eligible for relief. For example, if you fraudulently transferred property between spouses or knowingly made other moves designed to avoid paying taxes, you will not qualify. There is also a two-year deadline. You must apply for equitable relief no more than two years after the IRS attempts to collect the tax from you, so acting immediately is important. If you are no longer living as a married couple and you owe unpaid taxes on a jointly filed return, a tax professional can help you determine if you are being assessed unfairly and if your circumstances may make you eligible to seek relief from the IRS. David A. Katzman is a certified public accountant licensed to practice in the State of Florida and the Commonwealth of Massachusetts. He is also a certified financial planner and certified senior advisor. Please consult your tax advisor for details and assistance in applying this general information to your specific situation.