If my husband doesn't report all of his income, can I be held responsible by the IRS?

I know that my spouse has not been reporting all of the income he earns on his tax returns, and given that we’re now divorcing I’m wondering if I might be responsible in the future if the IRS finds out?

By Kathryn Freed-Collier
September 30, 2013

Kathryn Freed-Collier, a family law- yer in Frederick, answers:

If you have filed joint tax returns with the IRS, you are responsible for any under reported earnings, during the time for which you filed jointly. Further, you could be liable to the IRS for purposely defrauding the IRS if you knew that your spouse was filing erroneous income statements at the time that you signed them. You would have a duty to amend your tax returns upon discovery of your spouse’s actions if you discovered this after the fact. If you are able to negotiate with your spouse to hold yourself harmless, in the event that the IRS demands additional funds, you can put a clause into your Marital Separation Agreement that your spouse will pay for any such penalties or taxes, including interest.

An example of such an agreement would be stated similarly to this language:

The parties agree to file joint Federal and State income tax returns for each calendar year for which the parties are entitled to do so. With regard to all joint income tax returns previously filed by the parties, the husband represents and warrants to the wife that he has paid all income taxes due on such returns, that he does not owe any interest or penalties with respect thereto, that no tax deficiency proceeding is pending or threatened against him, and that no audit is pending with respect to any such returns. The husband further covenants that in the event of any deficiency assessment on any joint income tax returns, whether filed prior to the execution of this agreement, or afterwards, the husband shall give the wife immediate written notice thereof.

The husband shall pay all amounts ultimately determined to be due, together with all interest and penalties, if any, as well as all expenses incurred if he contests the assessment. The husband shall hold the wife harmless from any claim, damage, or expense arising out of any joint income tax returns, and any deficiency assessment in connection therewith. Any tax refunds from any joint returns shall be equally divided between the parties and once divided shall be the sole and separate property of each respective party, and the parties shall endorse any such refund checks upon division equally thereof.

In the event that the wife files Federal and State income tax returns as married, but living separately, the wife agrees to pay all tax due on such income taxes which she files in this manner. The wife covenants that in the event of any deficiency assessment on any married, but living separate taxes filed on her behalf, she is solely responsible for such assessments and further warrants that there is no tax deficiency assessment, either pending or threatened against her, and no audit is pending with respect to any such returns filed married, but living separately.

For more FAQs and answers by divorce professionals, please visit www.divorcemag.com.

Answers provided here are for general education only and should not be considered as formal legal advice nor to be construed as a form of lawyer/client relationship. We advise that you contact a professional, present all the facts and seek appropriate guidance.

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September 30, 2013
Categories:  Financial Issues|FAQs

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