Dividing property in a divorce is difficult enough as is, but dealing with shared IRS debt can be a nightmare. Whether you resolve these issues in mediation or in court, you’re bound to find this process frustrating.
The better you understand the role IRS debt plays in your divorce, the easier you’ll find it to arrive at a mutually beneficial outcome. Below, we explore the basics of tax debt division and how the process may impact your divorce:
Marital Tax Debt Is Treated Like Other Debt
Ultimately, classification matters little when it comes to IRS debt, which is treated unlike any other form of marital debt. Whether you’ve accumulated credit card debt, unpaid loans, or other obligations, it will all be divided similarly based on the laws in your state. In Colorado, this means that debt is divided in an equitable (or ‘fair’) manner. When it comes to back tax debt, often the higher earning spouse will take on a greater share of the obligation to pay back taxes. In the eyes of the IRS it doesn’t matter, if you filed jointly, the IRS debt is joint and severable.
Remember: The IRS Isn’t Quite Like Any Other Debt Collector
While tax debt logistically looks the same as dividing other forms of debt, collection efforts can vary dramatically. The IRS can pursue recovery strategies not available to the average debt collector. In rare cases, relief from joint liability may be available to the ‘innocent spouse.’
Another factor to take into consideration when dividing property and debt: the IRS frequently recovers funds by issuing property liens, garnishments, or bank levies. This can be risky for spouses who think by taking on a greater share of back taxes they will also gain a greater share of property; failure to keep up with tax debt obligations could result in a devastating lien, which will linger regardless of the status of joint property.
Whether you’re currently divorcing, happily married, or single, you deserve reliable tax advice as you tackle IRS debt. Highland Tax Resolution can help; contact us today at 720-398-6088 to discuss your options.