With tax time looming around the corner, many married couples are in the process of preparing their 2012 taxes. For couples who are recently separated or divorced, questions related to taxes and tax liabilities often arise.
Couples who are going through a divorce or recently finalized a divorce may have questions about how to file their taxes. Is it better to file jointly for one more year or does it make more sense to file independently? Much depends upon an individual’s financial circumstances and that of their soon-to-be ex-spouse.
For example, say a husband and wife are in the process of getting divorced and have lived apart for months. The wife, a stay-at-home mother, does not work and has relied upon her husband’s income. To that end, the couple owes back taxes and the husband has accrued a lot of new debt. In this case, how can the wife limit her tax liability?
Under the provisions of the Internal Revenue Code, a husband or wife whose spouse has accrued debt without their consent or knowledge can seek protection under “innocent spouse” relief. This provision effectively absolves a spouse of all personal tax liability.
As with most financial matters, particularly those involving the IRS, a husband or wife will need to provide adequate financial information and additional documentation to prove eligibility under the “innocent spouse” provision. For this reason, it’s important to seek legal advice and well as advice from a financial professional.
Going through a divorce can be emotionally, mentally and financially taxing. For spouses who previously relied upon the earnings of their significant other, a divorce can be especially scary. Enlisting the assistance of a competent team of legal professionals, however, can bring peace of mind and help ensure the best possible outcome with regard to a divorce settlement.
Source: Monterey Country The Herald, “Barry Dolowich: Divorce and tax liability,” Barry Dolowich, Feb. 5, 2013