Helping Clients Navigate A Course To A Better Future

Do you need to deal with future tax issues when divorcing?

Many spouses understand that in a divorce, you don’t just divide assets but also debts. One detail that few divorcing couples consider when addressing their future debt, though, is the potential of there being a tax audit and back taxes due.

As you may imagine, finding out that you have back taxes due without seemingly any pre-designated plan for splitting the responsibility for paying it (in a divorce decree) may be hard to come to terms with. What are your options in this instance?

Does the IRS have to respect your divorce decree?

A divorce is a state court matter. Therefore, the Internal Revenue Service (IRS) is under no obligation to honor your divorce decree. They have one sole goal, which is to secure the funds that they pursue. If you and your spouse were filing a joint return all the years that you were married, then it’s unlikely that they will hesitate in coming after you both to recover what they believe that you owe them.

If you wonder what “coming after you” entails, the IRS may seize and sell off any property that you have to pay off your tax obligation as well as any interest and penalties. A good rule of thumb is that they come after the assets that are easiest to seize, whether those are wages or cash in a bank account.

If you have been filing your tax returns separately and the IRS comes after you or your ex-spouse for back taxes, then there’s a strong likelihood that the other spouse won’t need to make any repayment.

In some cases, if the IRS tells you there’s a big tax obligation due after your divorce has been settled, then you might be able to wage an innocent spouse defense to absolve yourself of having to pay anything due.

If you have concerns about past tax filings handled by your spouse for both of you, you’ll certainly want to address that in divorce negotiations, including accounting for them during property division discussions. This is the only way to ensure that your future financial interests are protected as much as possible.