Tax Debt and Divorce: Who Pays the Back Taxes?
A divorce is a complicated situation no matter how you look at it. In addition to all of the emotional issues you have to battle, you also have to sort through a laundry list of financial issues when trying to separate merged finances. Many married couples have joint accounts, own property that belong to both and have been filing income taxes jointly for years. So, what happens when a couple owes back taxes and they decide to divorce?
Tax Debt Generally Follows Other Debt and Property Divisions
The general rule of thumb is that tax debt is seen in divorce proceedings as any other kind of debt. So, when your attorneys work on the divorce settlement and determine how much each party is responsible for paying, tax debt is included, along with credit card bills, mortgage balances and any other debt. If property and debts are divided evenly between spouses, then your tax debt (including back taxes) is also divided evenly and each of you are required by law to pay your share. Settlements are not always equal, however, and sometimes one side will argue to pay more tax debt in order to also receive more of the share of property.
Exceptions to This Rule
For the majority of states, property and debt is divided evenly in a divorce. However, you should note that if you happen to live in one of the following states – Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin – these states treat property and debt a little differently. In those states, the property and debt you acquire during marriage is considered “community property” and split evenly in a divorce. These states consider property and debt brought into a marriage as “personal property” and this is assigned to the spouse who brought it into the marriage. So if back taxes were brought into the marriage in these states, the back taxes would remain the responsibility of the spouse who brought them to the marriage.
Filing Your Taxes After a Divorce
One of the most frequently asked tax questions during or after a divorce is related to filing. If your divorce was not final by the end of the year (December 31), then you will need to file as married for that calendar year. You can choose to file separate returns, but keep in mind that you are legally responsible for a fraudulent return filed by your spouse.
Success Tax Relief Can Help Sort Out Tax Issues Surrounding a Divorce
Divorce is extremely difficult for all involved and there are many unique variables to consider in a divorce case. Tax returns and payment of back taxes is one of the things that you can easily get help with. A full service tax firm like Success Tax Relief can provide some much needed help and support during this difficult time and take care of the complicated tax issues related to your divorce. Contact us today!