Can You Be Liable for Your Spouse’s Tax Debt?

Can You Be Liable for Your Spouse’s Tax Debt

Married taxpayers often choose to file joint tax returns because of the higher standard deduction amounts, marginal tax rates thresholds, and other benefits. One aspect of joint filing that taxpayers are sometimes unaware of is that both taxpayers are jointly and severally liable for the taxes due, as well as any penalties or interest that are imposed by the IRS.

Joint and Several Liability for Tax Debt

Joint and several liability means that the IRS can go after either taxpayer (or both) for the full amount of the tax debt. Even if you later divorce, the IRS can go after you for tax debt from previous tax years when you filed a joint return.

If your spouse has tax debt, you are liable for the entire amount of the debt unless you meet an exception to this rule referred to as innocent spouse relief.

Innocent Spouse Relief 

Innocent spouse relief provides you with relief from additional tax you owe if your spouse failed to report income or claimed improper deductions or credits.

There are actually three types of innocent spouse relief. The first, referred to as traditional innocent spouse relief, requires that all three of the following conditions are met:

  • You filed a joint return that has an understatement of tax solely attributable to your spouse’s erroneous item
  • You establish that at the time you signed the return you did not know, and had no reason to know that there was an understatement of tax
  • It would be unfair to hold you liable for the understatement of tax considering all the facts and circumstances

The second method of relief from joint and several liability is referred to as separation of liability. This can be granted for taxpayers that are separated, divorced, widowed, or have lived apart from their spouse for the 12 month period ending on the date that you are requesting relief. You also cannot have had actual knowledge of the item that gave rise to the understatement of tax.

Finally, equitable relief can be granted in cases where the other two methods of relief do not apply. While the other two provisions allow relief for items that were not shown on the return, but later assessed by the IRS, this provision can also apply to items that were shown on the return, but not paid.

All the facts and circumstances are taken into account when determining whether equitable relief should be granted. Revenue Procedure 2013-34 provides information on how the IRS will consider abuse and financial control by the non-requesting spouse when making this determination.

For more information, see our flowchart on innocent spouse relief.

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