Tax Debt Relief After Divorce

Russell Knight

Russell D. Knight has been practicing family law as a Chicago divorce lawyer since 2006. Russell D. Knight amicably resolves tough cases while remaining a strong advocate for his client’s interests.

More about This Topic

Generic selectors
Exact matches only
Search in title
Search in content

Recent Articles

Leave a Comment





Innocent Spouse Relief And Illinois Divorce

Tax Debt Relief After Divorce

People who cheat on their spouses, betray their spouse’s trust and disregard their spouse’s feelings…usually don’t care much about what they owe the Federal government in taxes.

But, most spouses file their taxes jointly and, therefore, both spouses sign the tax return.

“The fact that an individual’s name is signed to a return, statement, or other document shall be prima facie evidence for all purposes that the return, statement, or other document was actually signed by him.” 26 U.S.C. § 6064

The signature on a tax return certifies that “Under penalties of perjury, I declare that I have examined the statement of facts presented in this protest and in any accompanying schedules and statements and, to the best of my knowledge and belief, it is true, correct, and complete.

Of course, if one spouse is unfamiliar with the finances of the marriage and/or relies on the other spouse’s representations that the return and its accompanying schedules are true, then the spouse can apply for relief from the IRS to waive their joint responsibility for the tax debt.

This relief is referred to the innocent spouse relief and is requested via this IRS form and this Illinois Revenue Service Form.

“[A]n individual who has made a joint return may elect to seek relief…if

(A) a joint return has been made for a taxable year;

(B) on such return there is an understatement of tax attributable to erroneous items of one individual filing the joint return;

(C) the other individual filing the joint return establishes that in signing the return he or she did not know, and had no reason to know, that there was such understatement;

(D) taking into account all the facts and circumstances, it is inequitable to hold the other individual liable for the deficiency in tax for such taxable year attributable to such understatement; and

(E) the other individual elects (in such form as the Secretary may prescribe) the benefits of this subsection not later than the date which is 2 years after the date the Secretary has begun collection activities with respect to the individual making the election, then the other individual shall be relieved of liability for tax (including interest, penalties, and other amounts) for such taxable year to the extent such liability is attributable to such understatement.” 26 U.S. Code § 6015(a-b)

The granting of relief under innocent spouse relief almost always turns on whether the innocent spouse had no reason to know the couple’s income was underreported.

“A person has reason to know of a fact if he had information from which a person of ordinary intelligence which such person may have, or of the superior intelligence which such person may have, would infer that the fact in question exists or that there is such a substantial chance of its existence that, if exercising reasonable care with reference to the matter in question, his action would be predicated upon the assumption of its possible existence.”  Sanders v. United States, 509 F. 2d 162 – Court of Appeals, 5th Circuit 1975

The IRS will then determine if your tax liability will be waived “taking into account all the facts and circumstances, it is inequitable to hold the individual liable for any unpaid tax or any deficiency (or any portion of either)”

Furthermore, you can only be an innocent spouse if you’re divorced or separated from your spouse.

“An individual shall only be eligible to elect the application of this subsection if—

(I) at the time such election is filed, such individual is no longer married to, or is legally separated from, the individual with whom such individual filed the joint return to which the election relates; or

(II) such individual was not a member of the same household as the individual with whom such joint return was filed at any time during the 12-month period ending on the date such election is filed.” 26 U.S. Code § 6015(c)(3)(A)(i)

It is uncharacteristically generous and kind of the federal government to offer innocent spouse relief for unpaid taxes. But, if you are an innocent spouse who is divorcing your tax cheat spouse, you don’t really need to worry about filing a request for innocent spouse relief…an Illinois divorce court can protect you.

llinois divorce courts “shall divide the marital property without regard to marital misconduct in just proportions” 750 ILCS 503(d)

“”marital property” means all property, including debts and other obligations, acquired by either spouse subsequent to the marriage” 750 ILCS 503(a) (emphasis mine)

If you’re an innocent spouse then the tax debt was incurred, the debt is marital.

“The Act does not require an equal division of marital property, but an equitable division” In re Marriage of Jones, 543 NE 2d 119 – Ill: Appellate Court, 1st Dist. 1989

Illinois courts can consider “each party’s contribution to the acquisition, preservation, or increase or decrease in value of the marital or non-marital property” 750 ILCS 5/503(d)(1)

The failure to pay taxes can be argued to be a “contribution to the…decrease in value of the…marital property”

Furthermore, If the money that was supposed to pay taxes was spent for a non-marital purpose by either party, the court can consider “the dissipation by each party of the marital property” 750 ILCS 5/503(d)(2)

So, no matter what relief the IRS offers, an Illinois divorce judge can force the tax cheat to indemnify the innocent spouse for any tax debt .

“Where one party is substantially responsible for the creation of the debt and has a substantially greater capacity to earn money, it is not an abuse of discretion for the trial court to assign the overwhelming majority of debt to that party.” In re Marriage of Werries, 247 Ill. App. 3d 639, 649-51 (1993)

If your spouse is a tax cheat, you have two options to remove your tax obligations due to their lies to both your and the federal government. Make sure you invoke both of them. Contact my Chicago, Illinois family law firm to learn more about how you should protect yourself from your spouse’s financial misfeasance.