Guide to Joint IRS Debt After Divorce

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What Happens to Joint IRS Debt When You Get Divorced?

A whirlwind of emotions surrounds the divorce process — but in the end, this is largely a financial arrangement. This is never more obvious than when you’re handling divorce-related tax concerns, such as the division of joint IRS debt. Keep reading to learn what happens to shared IRS debt when you divorce:

Who Is Responsible for IRS Tax Debt?

Typically, tax debt is treated like most other forms of debt during a divorce. Similar examples include mortgage balances and credit card debt. With all of these, debt division largely depends on where the couple in question resides.

In Colorado, like many states, divorcing spouses divide debt equitably. This does not mean that each spouse is responsible for an equal share of the debt, but rather, that all efforts to divide debt are fair.

Can Spouses Find Relief from Tax Debt?

Another consideration impacting the division of tax debt? Joint returns leave both spouses “jointly and severally liable” for not only their tax burden but also, all ensuing interest or penalties. In some cases, however, it’s possible for spouses to obtain relief from joint liabilities.

Available types of relief include:

  • Innocent spouse. In the event that one spouse fails to report income or improperly claims deductions, the other may no longer hold joint liability.
  • Separation of liability. Spouses who are legally separated or no longer live together sometimes qualify for this form of relief, which allows for the separate allocation of owed taxes.
  • Equitable relief. When divorcing spouses fail to qualify for the two main versions of relief highlighted above, equitable relief may still be an option.

 

As you deal with complex tax concerns, look to the Highland Tax Group for support. We understand how stressful IRS issues can be in the midst of a divorce, so we’re here to ease that burden. Reach out today to learn more about your options for working with an enrolled agent.