When couples file a joint federal tax return, both spouses are generally “jointly and severally” liable for the entire tax liability, plus any penalties and interest. This means the IRS can pursue either spouse for the full amount owed, regardless of who earned the income or caused errors on the return. This rule, while straightforward, has led to unfair financial burdens, especially when one spouse was unaware of the other’s misreported or unreported income.
To address this issue, the IRS offers Separation of Liability Relief, one of three specialized innocent spouse relief options available under IRS rules (see IRS Form 8857). This relief allows divorced, legally separated, or widowed taxpayers who filed a joint return to effectively split the joint tax debt based on their own responsibility for the amount owed. It does not forgive the tax, but reallocates the debt fairly between former spouses.
Joint and Several Liability Background
Under “joint and several liability,” each spouse is responsible for the entire tax debt on a joint return, including any unpaid tax deficiencies. This legal principle means the IRS can seek collection from whichever spouse it chooses, regardless of fault.
How Separation of Liability Relief Works
This relief works by assigning portions of the tax liability to each spouse based on who earned income or caused the understatement or underpayment. For example, if your ex-spouse hid freelance income or claimed false deductions, you would not be responsible for those amounts if you qualify and the IRS agrees.
Eligibility Criteria
To qualify for Separation of Liability Relief, you must meet all these conditions:
- You filed a joint federal income tax return with your spouse for the year(s) in question.
- You are legally divorced, legally separated, or your spouse is deceased.
- You have not lived with your former spouse at any point during the 12-month period ending on the date you file the relief request.
- You did not transfer assets between you and your spouse as part of a fraudulent scheme.
- You did not know, and had no reason to know, about the understatement of tax caused by your former spouse at the time you signed the return. (Some exceptions may apply for limited knowledge if it’s unfair to hold you responsible).
Filing for Relief
You apply for this relief using IRS Form 8857, “Request for Innocent Spouse Relief.” When filling out the form, select the option for Separation of Liability Relief and provide detailed explanations and supporting documents such as divorce decrees and financial records showing income attribution.
The IRS will notify your former spouse of your request, who may respond or provide additional information. The IRS then makes a determination and sends a written decision.
Important Timing
You generally must file for Separation of Liability Relief within two years after the IRS begins collection efforts against you (such as a levy or garnishment). Missing this deadline usually means you lose eligibility.
Example Scenarios
Hidden Income: After divorce, Jane discovers her ex-husband underreported freelance earnings from several years ago, resulting in a joint tax bill. She qualifies for separation relief and only pays tax related to her reported income.
False Deductions: Tom’s ex-wife inflated business deductions on their joint return. As Tom did not know and didn’t live with her during the last 12 months, he qualifies for relief and avoids responsibility for those deductions.
Tax Debt Attribution
The IRS attributes items causing understatements to the spouse who earned or benefited from them. Understanding attribution is key to how the IRS divides the liability under Separation of Liability Relief.
For more detailed guidance, see our articles on Innocent Spouse Relief Application and IRS Form 8857: Request for Innocent Spouse Relief. You can also review official IRS resources such as IRS Publication 971 for Innocent Spouse Relief.
External Resource
- IRS Publication 971, Innocent Spouse Relief: https://www.irs.gov/pub/irs-pdf/p971.pdf
By understanding and correctly applying Separation of Liability Relief, eligible taxpayers can protect themselves from unfair tax liabilities related to their former spouses, gaining financial independence and peace of mind after a separation or divorce.