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My recent ex signed 2 years of tax returns. I am responsible under the divorce agreement for the entire debt. Assuming I can work out an OIC, will the IRS then go after her, putting me into a situation where the local court system goes after me for enforcement etc? I ask because the living expenses do trump the averages IRS posts., but all of this is to no avail of they go after her and the local court gets their feathers in a uproar.
Hi! Welcome back! I am the expert who answered your original question! Glad to see you back here! Thanks for returning!
If you signed a tax return, the IRS assesses what they refer to as "Joint and several liability" meaning that you and your spouse are both responsible for 100% of the tax bill. They don't just say that each of you is responsible for half, they try to get all of it from both of you, and until they are satisfied, they continue to pursue. Even if the divorce decree states that you are solely responsible and will pay, the IRS will still try to collect from her.
However, the IRS does allow "Innocent Spouse Relief" which would allow your spouse to walk away from the debt, leaving it all to you. It allocates all tax, interest and penalties to the other spouse. The way this is handled is that your wife would file asking for the Innocent Spouse Relief by completing a Form 8857. Your wife will file the Form as soon as she knows about the tax liability. In order for the relief to be granted, several conditions must be met. One is that you have been living apart for a year, another is that your spouse did not really know about the understated tax liability or its consequences when she signed the tax return. A final criteria is that holding her responsible for the tax would be unfair given the facts and circumstances.
I recently got Innocent Spouse Relief for one of my clients. Her husband had pulled money out of his 401(k) to keep his business running. He did not report it on the joint Form 1040 that they filed. The IRS came back and assessed $25k in additional tax. My client and her spouse are going through a divorce now. We filed innocent spouse relief, and the IRS granted it to her, allocating the entire balance due to her former spouse. So it is possible to win!
I hope this has answered your question! If you have any more, please feel free to ask me. If you have found this helpful, please rate me highly! I would appreciate it!
I stand by my original advice, two posts up. You said that you wanted to avoid your wife having to take you back to court, or having the local courts involved. The Innocent Spouse Relief would accomplish that. Follow it through just as I stated. I would also pursue the offer in compromise, but you said your concern was with your wife coming after you in court.
I hope that I have answered your questions! I thank you for asking for me this morning. My wife had a rough night at chemo last night, so I did not get online until after the other expert had answered. He opted out, so I re-answered you.
If you have found my answer helpful, please rate me highly! As before, I would greatly appreciate it! And good luck with your divorce!