When married taxpayers file jointly, they become jointly AND INDIVIDUALLY responsible (often referred to as "jointly and severally liable") for the tax and interest or penalty due on their returns. This is true even if they later divorce.
Joint filers remain "jointly and severally liable" even if a divorce decree states that a former spouse is responsible for any amounts due on previously filed joint returns. One spouse may be held responsible for all the tax due, even if the other spouse earned all the income. However, a spouse may be relieved of responsibility for tax, interest, and penalties on a joint return under special relief rules. Recent tax law changes make it easier for a taxpayer to qualify relief.
Tax liability relief for joint filers - Under changes that apply to tax liabilities arising after July 22, 1998 (and liabilities arising before that but unpaid as of that date), a spouse can be relieved of tax, interest, and penalties on a joint tax return. The request is made on Form 8857. Three types of relief are available:
- Innocent spouse relief
- Separation of liability
- Equitable relief
Innocent Spouse Relief - A taxpayer must meet all of these conditions to qualify for innocent spouse relief:
- Must have filed joint return with an "understatement" of "erroneous items" of his/her spouse;
- Must establish that at the time the taxpayer signed the joint return, he/she didn't know (and had no reason to know) that there was an understatement of tax;
- Taking into account all the facts and circumstances, it would be unfair (i.e., inequitable) to hold taxpayer liable for the understatement of tax.
Injured Spouse Relief - If a taxpayer's spouse has not paid child or spousal support payments or certain federal debts (e.g., student loans), the refund on a joint return may be used to pay the past-due amount, even though the debt arose prior to marriage to the present spouse. An injured spouse may be able to get his/her share of any refund, however. A person qualifies as an injured spouse under the following circumstances:
- He/she is not required to pay the past-due amount;
- He/she received and reported income on the joint return;
- He/she made and reported tax payments (estimated payments or withholding) on the joint return.
An injured spouse can get his/her portion of a joint return by filing Form 8379, Injured Spouse Claim and Allocation. Note: Taxpayers residing in community property states must divide refunds according to local law. If a taxpayer lives in a community property state in which all community property is subject to the debts of either spouse, the entire joint refund is subject to offset. Claims from California, Idaho, Louisiana, and Texas will usually result in no refund for an injured spouse.
The above is an overview of very complicated provisions of the tax law. Qualifying and filing for relief under these provisions requires the assistance of a professional. If you believe you qualify or have further questions, please contact this office.