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How an ex-spouse's tax mistakes can affect the other spouse

Connecticut residents who are planning for or are going through a divorce may be interested in how they could be affected by their ex-spouse's tax penalties. The bad news is that the Internal Revenue Service considers any penalties related to a joint return to be the responsibility of both parties. The good news is that there are methods for obtaining relief from liability due to a former spouse's tax mistakes.

One woman who had gone through a divorce recently recounted the story of how she was affected by her ex-husband's understating his income on their joint tax return. When the IRS discovered the mistake, it penalized the couple $2,000 even though they were then divorced and the error was only related to his income. When she filed her new individual tax return, the IRS deducted the penalty from her refund and her ex-husband ended up paying nothing.

Technically, a joint return is the responsibility of both spouses, regardless of which spouse makes an error or whether they get divorced after the return is filed. However, a spouse can sometimes avoid being penalized for the other spouse's negligent or willful errors. An application for Innocent Spouse Relief is for this very situation, when one spouse reports incorrect income or deductions. A Separation of Liability Relief allocates any tax penalties to the appropriate spouse. The IRS has other forms of equitable relief available as well.

While spousal support, property division and child custody are the issues that most often arise in divorce proceedings, it is clear that income tax considerations can play a part as well. A well-drafted property settlement agreement may include a mechanism to take into account subsequent tax assessments or penalties imposed against one of the parties.

Source: ABC, "How Divorcees Can Get Hit With Ex-Spouse's Tax Penalties", Judy O'Connor, November 25, 2013

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