In late November, New Yorkers who might go through divorces were cautioned to be careful about the way they handled issues like tax obligations. Analysts noted that spouses are generally held jointly accountable for joint returns. Unlike properties that go through formal divisions of assets, however, both spouses retain responsibility for overdue taxes even after they split.
In one case, a woman who had divorced her husband later found out that he owed $2,000 in back taxes because he failed to disclose some income. Since he had received the income while they were still married, however, the woman was also charged by collectors. Although she started making payments until the bill was reduced to $1,600, she was further penalized when she filed her taxes; the Internal Revenue Service took the remaining sum out of her return. In the end, she paid the entirety of the man’s tax obligation.
Observers say that people who find themselves in such situations might gain relief by petitioning the IRS. Even if these individuals already paid taxes for their ex-spouses, filing a Request for Innocent Spouse Relief, or IRS Form 8857, could win them a refund. The IRS provides three different forms of relief specifically for spouses who don’t think they should be liable for joint returns.
Divorces can be complex, and those who go through separations may not understand all of their options. Separation planning and mediation help, but some individuals end up paying off their exes’ debts or taking other financial losses after they split. Attorneys may be able to assist these people by helping them figure out what kind of tax obligation relief to apply for after a divorce or by investigating potentially hidden assets beforehand.
Source: ABC, “How Divorcees Can Get Hit With Ex-Spouse’s Tax Penalties“, Judy O’Connor, November 25, 2013