Don't Let Your Ex's Tax Debt Drag You Down

New rules for innocent spouses

The IRS announced rules that should prevent the divorced and legally separated from being held accountable if their former spouse cheated on taxes, didn't pay or made mistakes calculating their bill.

These innocent-spouse rules provide relief for spouses who can establish they didn't know taxes were not being paid and for scenarios with divorced or separated couples where it is clear the other spouse was responsible for the tax debt.

It is now possible to apply for three distinct types of relief: innocent spouse relief, separation of liability and equitable relief.

  • Innocent spouse relief can be sought when you did not know and had no reason to know of errors on a joint return.
  • Sorting out liability does not require total innocence; you will be responsible only for any portion that you forgot to report. That's far easier to claim.
  • Equitable relief comes into play if you don't qualify for either of the above.

You can qualify for relief from an understatement of tax or underpayment if, when all the facts are taken into account, it is clear that it would be unfair to hold you liable.

To request relief, you must file form 8857, Request for Innocent Spouse Relief.

You must file the form no later than two years after the IRS first tried to collect the tax from you. After you file, you can ask the U.S. tax court to review your request if you disagree with the IRS decision, or if the IRS has not sent you a notice of their decision within six months after you filed the form.

Details are in the free IRS publication 971, Innocent Spouse Relief.

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