Who Is Liable To Pay Back Taxes When Filing Jointly?

“I didn’t do it! She did!” you say, as you sit in my office explaining the current, messy state of your financial affairs. Let’s say your wife failed to report her income from running a daycare facility out of your home, and since she handles your taxes, you had no idea. Now you’re separated, on the road to divorce, the IRS is calling you more often than your mother, and you need to know your options.

When married taxpayers file jointly, the letter of the law states that both taxpayers are “jointly and severally liable” for the tax, and “any additions to tax, interest, or penalties that arise as a result of the joint return even if they later divorce.”(IRS) That “severally” means that each spouse is entirely responsible for the whole sum of taxes, interest and penalties. So, even if one spouse earned all the income, the other spouse is just as responsible for payment.

However, there is some relief available if you qualify.

1. Innocent Spouse Relief

Innocent Spouse Relief must be applied for no later than 2 years after the date the IRS first attempted to collect tax from you. If you’ve been sitting on your tax return for longer than that, you might be out of luck. Here’s how it works: If your spouse really was responsible for claiming false deductions or reporting less income than actually earned, you may not be liable if

The joint return’s wrong numbers were solely caused by your spouse’s erroneous item (deductions, credits, property).
You establish that when you signed the joint return, you didn’t know there was an error.
It would be unfair to hold you liable, when all the circumstances are taken into account.

Do you qualify for Innocent Spouse Relief? Let us help you find out.

2. Separation of Liability Relief

If you are separated or divorced, this type of relief can separate the liability so you only pay the amount for which you are responsible. To qualify, you only have to meet one of the requirements: You’re divorced or legally separated from the spouse named on the return; you are widowed; or, you haven’t lived with your spouse for one year from the date you requested relief.

This type of relief must also be applied for no later than 2 years after the date the IRS first tried to collect tax from you.

3. Equitable Relief

If you don’t qualify for Innocent Spouse Relief or Separation of Liability Relief, you have one more option: Equitable Relief. The qualification for Equitable Relief is complicated, but you have a chance if you can establish that it would be unfair to hold you liable for the underpayment of tax. To see if you meet the other requirements, contact us. We’re happy to walk you through the process.

Remember: If you didn’t know that your taxes were underpaid or understated, you may not be liable to pay the entire amount. If you think you may qualify for relief, we can help you make your case.

Original Post By:  Barry Fowler

Barry Fowler is licensed to represent taxpayers before the Internal Revenue Service (IRS) and is a longstanding member of several tax industry professional organizations including the National Association of Enrolled Agents (NAEA), National Association of Tax Preparers (NATP), Texas Society of Enrolled Agents (TSEA), and the American Society of Tax Problem Solvers (ASTPS). With experience in the tax and finance industry spanning over twenty years, Fowler’s expertise includes tax resolution, personal financial planning, tax return preparation, financial statements, and general ledger bookkeeping. He has been instrumental in helping hundreds of people resolve complex tax issues with the IRS.

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