When married couples file jointly, the tax liability is joint and several. Simply put, both individuals are liable for the entire amount. The IRS can garnish the wages of either spouse and could attach either community property or separate property up to the amount owed, plus penalties and interest
In a continuing marriage, joint and several liability has little impact. However, after a divorce, the IRS will seek payment from both parties without consideration of the relative contribution towards creating the tax bill. The family court that grants the divorce does not have the power to change this.
The IRS can provide relief through a provision known as Innocent Spouse Relief, if the following three conditions are met.
- A joint return has an understatement of owed tax due solely to a misstatement by one spouse. This can include failing to report income, taking deductions or credit improperly, misstating an asset basis or any other misstatement that results in a lower tax.
- The innocent spouse did not know of the misstatement when signing the tax submittal.
- Considering all facts, it would be unfair to hold the innocent spouse liable.
After the correction of a misstatement, additional taxes, interest, and penalties will be owed. Innocent Spouse Relief will shift liability of these additional amounts solely to the other spouse. While this provision could technically be applied to a couple that is married, it is intended for divorced couples.
To obtain Innocent Spouse Relief, an IRS form must be submitted. While it is possible to complete the form and submit it without assistance, a tax adviser should be considered to increase the chances of a positive result. If you would like to discuss a specific innocent spouse situation, please contact us.