Skip to main content

Divorce and Taxes: Issue #5. Joint Tax Liability

Issues 1 through 4 all focus on the tax liabilities created post-divorce. But what about tax liability incurred during the marriage?

Issue #5. JOINT TAX LIABILITY: The Court has the power in a divorce case to assign both assets and liabilities, including tax liability incurred during the marriage. If there are joint tax returns filed during the marriage for which taxes are still owed, that liability is owed by both parties to the taxing authorities. The Court may assign that debt to one party by order or agreement, but that doesn't always satisfy the taxing authorities.

Unless you file an innocent spouse application with the IRS (and the IRS makes an innocent spouse determination in your favor), they will still consider a joint debt owed by both parties until satisfied. A probate court order allows you to collect against your former spouse but does not prevent the IRS from collecting against you. Therefore, if there are any assets available for the payment of tax debt at the time of divorce, paying the debt off immediately is recommended.

We also recommend including language in any settlement agreement to deal with the possibility of an audit that assigns debt on a joint return that was previously considered satisfied:

"For the years of the marriage (__________ to __________), if there is a deficiency assessed in connection with any joint federal or state income tax returns heretofore or hereafter filed, or if any other notice is received by either Party relating to any Federal or State tax, interest or penalty claim, the Party notified thereof shall forthwith notify the other Party immediately in writing. Each Party, on account of whose net income a deficiency is assessed, shall pay the amount ultimately determined to be due thereon with respect to his or her net income, together with interest and penalties, and shall pay as well any and all expenses that may be incurred if he or she shall decide to contest the assessment.

In the event that the deficiency is assessed with respect to joint income, each shall pay the deficiencies and expenses in the same proportion as each Party actually received the said gross income for the calendar year in which the deficiencies and expenses are assessed. For purposes of this EXHIBIT “gross income” shall be defined in accordance with the applicable provisions of the Internal Revenue Code of 1986 and in accordance with the applicable provisions of the Massachusetts Child Support Guidelines.

Each Party shall keep the other fully informed of any and all steps taken by him or her with respect to any deficiency assessment. The Party whose actions are responsible for the deficiency, if any, shall in all respects indemnify the other against and hold him or her harmless from any deficiency assessment or tax lien arising out of any joint return heretofore or hereafter filed by the Parties, as well as any damages and expenses whatsoever made in connection therewith including reasonable attorney's fees and costs."


Click here to read Divorce and Taxes: Issue #6. Same Sex Marriages.

Comments

Popular posts from this blog

What is the purpose of the Divorce Nisi waiting period?

In Massachusetts the statutory waiting period after a Judgment of Divorce and before the divorce becomes final (or absolute) is called the Nisi period. After a divorce case settles or goes to trial, a Judgment of Divorce Nisi will issue and it will become Absolute after a further ninety (90) days. This waiting period serves the purpose of allowing parties to change their mind before the divorce becomes final. If the Judgment of Divorce Nisi has issued but not become final yet, and you and your spouse decide you don't want to get divorced, then you can file a Motion to Dismiss and the Judgment will be undone. Although many of my clients who are getting divorced think the idea of getting back together with their ex sounds crazy, I have had cases where this happened. In addition to offering a grace period to change your mind, the Nisi period has three other legal effects: 1. The most obvious effect of the waiting period is that you cannot remarry during the Nisi period, be

New Massachusetts Child Support Guidelines (2021): Big Changes, Little Changes, Typos & some Unexpected Results

UPDATE: The court has released a web calculating version of the 2021 MA Child Support Guidelines Worksheet .  It resolves some of the typos referred to below, but the unexpected calculations still apply. Every four years, per federal mandate, the Massachusetts Probate & Family Court revisits the Child Support Guidelines through the work of a Task Force appointed by the Chief Justice.  The 2021 Massachusetts Child Support Guidelines were recently posted.  They take effect on October 4, 2021.    If you are interested in a training on all of these changes to the new Child Support Guidelines: DMTA Presents the 2021 MA Child Support Guidelines Update  – Attend this event to learn the key updates you need to know for your mediation clients. Presented by Justin Kelsey of  Divorce Mediation Training Associates  and  Skylark Law & Mediation, PC . For a full comparison of all the  tracked changes between the 2018 and 2021 Massachusetts Child Support Guidelines you can download a pdf sho

Online Tool for Creating Parenting Plans

It is our hope that all families find a way to resolve conflict peacefully.  This is especially true when children are involved.  Divorced or separated parenting has many complications and the first is just deciding how to share time with a child from two separate households.  Developing a schedule can result in a lot of tension, especially if parents have trouble picturing how this new schedule will interact with their work schedules and the schedules of their children. To help make this easier, we've created an online tool for creating parenting plans that is simple and easy to use: We encourage parents, regardless of the process they are using to divorce, to use this form to assist in evaluating and settling custody disputes. The form allows you to choose between the Model Parenting Plan proposals or customize your parenting plan over a four week period by clicking directly on the form.  When you click on a section of the calendar it switches between Mom and Dad, an