Divorcees may face unexpected tax burdens

On behalf of The Walters Law Group, Ltd. posted in Divorce on Monday, December 9, 2013.

Financial columnists responding to divorced individuals noted that people may be confronted with unexpected taxes following their separations. In one instance, Illinois residents may have heard of a husband who failed to claim all of his income during his marriage, and his wife was told that she was equally responsible for the outstanding amount after they obtained a divorce.

Following her payment of a portion of the money, the woman filed her taxes first and ended up covering her ex-husband’s overdue tax obligation and he didn’t have to pay anything. Analysts said that the Internal Revenue Service normally judges both spouses responsible for taxes that apply to jointly filed returns. They also noted, however, that these individuals could apply for multiple forms of relief from joint liability.

Divorcees who wanted to pursue tax refunds by petitioning for relief were advised to complete and submit IRS Form 8857. The IRS would then decide whether these individuals qualified for relief based on the information that they submitted and file a refund if necessary.

Managing debt obligations during divorces is just as important as dividing property assets, but some couples fail to make provisions for things like overdue taxes. These individuals may not be aware that their spouses owe money or they could simply lack understanding of the applicable revenue codes. Although some possess the financial means to pay unexpected taxes later, others experience significant financial duress in the process. Attorneys who practice family law may be able to help these individuals discover hidden assets or debts during the early stages so that they’re able to come to amicable separation agreements without being caught off-guard later.

Source: ABC, “How Divorcees Can Get Hit With Ex-Spouse’s Tax Penalties“, Judy O’Connor, December 25, 2013