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Things to Know for Divorcing Couples Who Owe Back Taxes

Even though most things come with an end, it is essential to always keep an eye on those aspects of our lives that do not change - no matter what happens. In this respect, even if you're filing for divorce and experience a drastic change in your life, you must not forget about the taxes that you owe to the government. As the divorce process may take its toll, so will taxes if left unattended. As such, in the following lines, we will tell you everything you should know if you're a divorcing couple and also owe back taxes! The Issue of Joint Return First, it is worth mentioning that, if you engaged in something called a joint return when you got married to your current partner, then you'll have some things to take care of. In short, a joint return makes it so that you pay taxes as a couple - as one single entity. If a divorce takes place, one must extract themselves from their partner's tax obligations. However, what happens with what you owe in terms of taxes? The Issue of Tax Debt When it comes to being assessed by the court of law, the debt based on tax will be treated as any other type of debt. What does this mean? Well, your lawyer will calculate the settlement for your divorce with the lawyer of your soon-to-be former partner. Then, to this settlement, they will lump in tax debt and label it as mortgage balances and other debt. This is because, when debt and property have to be divided, taxes that you owe are divided according to the settlement and to the law of the state that you live in. The Issue of Community Property/ Equitable Distribution Roughly ten US states consider property/debt that a couple collects during their marriage - up until their divorce - as community property. Naturally, everything that one of the spouses has or owes prior to the marriage is seen as personal property. Now, during a divorce, community property is divided between the two spouses, leaving personal property to its initial owner - this includes debt as well. However, keep in mind that there are states that will divide both debt and property after the spouses go through an equitable divorce. This divorce basically determines which spouse should get what - in terms of property and debt. The Issue of Settlement Choices As mentioned above, the lawyers of the two parties usually create a statement that will decide how things are divided during a divorce. Depending on the state, the divorce settlement may also include tax debt. As such, one of the spouses may choose to be left with more tax debt on their side so that they get a bigger part of the property that must be shared. For example, instead of splitting a home in two, one spouse may choose to take responsibility for more tax debt and receive the entire home during the divorce. The Bottom Line As you can see, couples that want to divorce are not absolved by tax debt. Still, the good news is that, depending on state and circumstances, one of the spouses can use this debt in their favor and either get rid of most debt that they have or use it to ensure a bigger part of community property for themselves. Last but not least, the spouses must keep in mind that any division of tax debt responsibility made during the divorce should show up in the divorce papers. This is to formalize this procedure and make sure that the two parties will respect the agreement they made. References and Sources https://finance.zacks.com/pays-back-taxes-divorce-3264.html https://www.lynchowens.com/blog/2017/december/things-to-know-for-divorcing-couples-who-owe-bac/ More Articles: More Articles: What Should You Know About Motorcycle Taxes? How to Claim Your Pet on Your Taxes Weirdest Taxes People Pay Throughout the World How To File Taxes As A Forex Trader How Do I Form and Incorporate A Company In Canada? Critical Illness Cover 5 cardinal rules of trading the CFD market The Pros and Cons of Online Instalments Loans Things to Know for Divorcing Couples Who Owe Back Taxes Everything to Know about Taxes on Foreign Real Estate Employment Income Taxes Worldwide Taxes - What's Legal and What's a Crime Weirdest Types of Taxable Income in the World Potential Tax and Money Habits that Make for a Crime

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