What Happens to a Couple’s IRS Debt During a Divorce?

Separating from a spouse of many years—possibly 20 or more—can be deeply painful emotionally. And then, of course, there are the innumerable logistical issues to be hashed out: Splitting up assets, figuring out custody and visitation schedules, and negotiating other fine points of the divorce.

Whether your ex collaborates to find solutions or fights you at every turn, you must be strategic. One common concern involves your collective debt. If you and your ex owe federal taxes, especially if you had been filing joint returns, how should that debt be apportioned? What will the court do?

In general, the court will consider your IRS tax debt as similar to other debts, such as loans, mortgages and credit card bills. As such, it will likely attempt to divide the IRS debt equitably. That doesn’t mean evenly, however! Depending on a host of factors, such as your and your ex’s income streams, other assets, future earnings, health and child care responsibilities, one spouse might wind up with a larger tax debt than the other.

A handful of states operate by “community property” rules. This means that debt you acquired to the IRS is considered your collective responsibility, and it needs to be divided equally. But any IRS debt that you brought into the marriage would continue to be your sole responsibility—your ex-spouse would not need to pay for it.

Colorado is NOT a community property state. But it does recognize a similar category called “marital property.” A qualified family law attorney working in conjunction with an experienced enrolled agent can help you figure out who should owe what and how to work with the court to ensure fairness.

What if you discover during the divorce proceedings that your spouse—who had been in charge of the household finances—had not been paying the IRS or had been underpaying the government? Fortunately, the IRS has a program called “innocent spouse relief,” which can help you avoid punishment for your ex’s negligence or wrongdoing.

Our team can work with you and your attorney to ensure an equitable solution. We can also help you pay off or eliminate your portion of the IRS debt and recover your financial equilibrium. Please get in touch now at 720-398-6088 for a confidential consultation.