Divorce and IRS audits are two of life’s most stressful life events. Unfortunately, one often follows the other. Like an evil version of chocolate meeting a nefarious version of peanut butter, the combination can be even more painful that the sum of its parts. About every 13 seconds, there’s a divorce somewhere in the United States. When marriages break apart, there are always financial consequences. The IRS notices changes in filing statuses. The law requires presiding judges over divorces to report financial inconsistencies to the IRS under ethical requirements, which often causes them to look deeper into your situation. It’s tempting to panic when you receive notice of an audit, but there may be options available that help you protect your finances.
The Innocent Spouse
In some situations, the IRS discovers tax situations that result in penalties, interest, and possibly even legal action. If one marital partner was unaware of the circumstances and not involved in the infraction, they can request innocent spouse relief. You may qualify if the following applies:
- You filed a joint return that understated your tax liability.
- You can prove the errors were due to your former spouse.
- When you signed the return, you had no knowledge it was incorrect.
- You file within two years of the IRS beginning collections proceedings.
Separation of Liability
When returns understate your tax liability, and you don’t qualify for innocent spouse relief, you may be able to request the liability be divided. In this situation, each spouse is only responsible for paying the portion of liability related to his or her income.
If you don’t qualify for either of the above types of relief, you may still be eligible for some help. Sometimes, couples report an incorrect amount, or they file correctly but don’t pay what they owe. The IRS says you are more likely to receive equitable relief if your former spouse abused you or if you were in poor mental health when you signed the return or filed for relief.
The IRS weighs and evaluates each case individually, and, most of the time, decisions involve a variety of factors. It helps to have a qualified tax professional to help you negotiate during this extremely troubling time.
Surviving a divorce is hard enough. Dealing with a substantial IRS debt while simultaneously hashing out a debt can be profoundly difficult. Fortunately, you don’t have to walk this path alone. Call the experienced IRS resolution team at Highland Tax Group at (720) 398-6088 to get clarity on your options.