With changes brought about by the Tax Cuts and Jobs Act, many people are left wondering how they will be affected come tax time. One change in particular will change negotiations for divorce agreements that will be finalized after Dec. 31, 2018 and could possibly give rise to old divorce agreements being revisited. That change concerns the deductibility/taxability of alimony and unlike other changes, this one is permanent.

Going through a divorce can be a complicated process. Dividing up assets, going to custody hearings, and arranging a new living situation for yourself is enough to leave anyone emotionally drained. One thing that should not be lost in the shuffle though is what is going to be done about any income tax debt that may have been incurred while you were married.

APPEALS PROCESS FOR INNOCENT SPOUSE RELIEF

Often times innocent spouse and injured spouse are used interchangeably, though they are two completely different types of relief. Knowing the difference between the two will save you the time and headache of having to resubmit your claim because you did it wrong the first time. Below are five differences between innocent spouse relief and injured spouse relief.

The two most common questions asked when someone files a tax return are how much of a refund will I get or how much am I going to owe.

Perhaps you’ve already heard of innocent spouse relief and have done research on the different relief options (innocent spouse relief, relief by separation of liability or equitable relief). Maybe you’ve even pursued one or more of these options already and were denied, simply because the circumstances surrounding your situation just didn’t quite fit the qualifications. There may still be options available depending on the nature of your case.

The IRS when assessing and collecting tax debt from a taxpayer follows the federal laws and regulations governing this but, when it comes to community property states and tax debt arising from community property, the IRS generally defers to the states’ community property laws as shown under Treasury Regulation (“Treas. Reg.”) § 1.66-1(b)(1). For taxpayers living in a community property state it is absolutely necessary to know what can be considered community property and what the tax implications are for the community property, especially after a legal separation or divorce.

If you don’t qualify for other types of relief such as innocent spouse relief under Treasury Regulations (“Treas. Reg.”) § 1.6015-2 or relief by separation of liability under Treas. Reg. § 1.6015-3, equitable relief, though sometimes difficult to have accepted, may be another alternative. Prior to considering equitable relief as an option the IRS must have determined you do not qualify for innocent spouse relief, relief by separation of liability, or relief from separate return liability for community income. Below are some key pieces of information to consider before pursuing equitable relief.

Relief by separation of liability may end up being the next best option if you don’t qualify for innocent spouse relief. Though this may not clear you completely of the tax debt the IRS has assessed, it could at least save you from owing a substantial amount.