Separated and divorced taxpayers who have filed joint returns may need innocent spouse relief so they are not held liable by the IRS for their exe’s failure to report taxable income or disallowed tax deductions. Joint liability is a risk that many taxpayers don’t recognize until it’s too late. Innocent spouse relief is one of the most frequently litigated issues in Tax Court, because the legal requirements are complex and detailed. Chapter 11 of my book contains an excellent discussion of innocent spouse relief and the related concepts, separation of liabilities and equitable relief.
Many married taxpayers choose to file a joint tax return because of the financial advantages and tax savings. Yet, when married taxpayers file jointly, both taxpayers are held jointly and individually liable, even if they separate or divorce. The tax, interest and penalties associated with a joint return may be collected from either or both of the taxpayers even if a divorce instrument states that one spouse will be responsible. In fact, one spouse may be held responsible for all the tax due even if all the income was earned by the other spouse. Thus, filing jointly during the marriage and after separation presents spouses with risks they must consider and protect themselves against.