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Divorce and Taxes Owed: Who is Responsible for Tax Debt in a Divorce?

August 12, 2024October 15, 2021 by Brotman Law

Joint and Separate Liability for Taxes Between Divorced Spouses

When a taxpayer files separately, it is clear who will bear the burden of any tax liability assessed by the IRS. However, it may not be as intuitive when a tax return is filed on behalf of two taxpayers.

If a joint return is filed, the liabilities linked to this return are held joint and several between both taxpayers. (Internal Revenue Code, IRC 6013(d)(3)). This means you are both on the hook for the entire tax liability, until it is paid or released.

How Do I File my Taxes if I am Getting Divorced?

August 12, 2024September 17, 2021 by Brotman Law

So you have passed the brink of no return in your relationship and decided to file for divorce. Before you do, it’s wise to make some financial preparations ahead of your court date. Getting pictures of assets, copies of bank statements and any retirement accounts is a good start.

How Are Transfers of Property Taxed in a Divorce?

August 12, 2024November 25, 2020 by Brotman Law

Timing of the Transfer

Under 26 U.S. Code §1041, you typically have a 6-year window of time from the date your divorce is finalized to make a transfer that is not subject to taxation. Once you go beyond 6 years, you are looking at two individuals that are divorced, transfer assets between each other could be considered a gift subject to different rules. Unless there is a valid reason that is beyond your control, the sooner you complete the transfer the better off you will be. Because the code specifies that the tax-free transfer must be incident to divorce, it may also help to include what the other spouse will receive under the divorce agreement.