My former spouse ran up a big tax debt can I get out of it? (Separate Liability Election)

Now, the next question we're going to answer is the second part of a three part question and the question is my former spouse ran up a big tax debt, can I get out of it?

Now, what we're going to talk about in this article is something that's called the innocent spouse/separate liability election. What does that mean?

In a different article, we talked about what I call classic innocent spouse and in the next video, we're going to talk about something called equitable relief. But in this article, we're going to talk about the separate liability election. In essence, what it allows you to do is it allows you to split the liability so that husband owes what tax was attributable to him and wife would pay what tax was attributable to her.

I'm not going to choose who is the innocent spouse in this video and who is the guilty spouse but let's go over the elements for separate liability election real quick.

The first element is you must have filed a joint return. I talk about this in the other videos. If you don't file a joint return, then there's no liability election or there's no liability to separate and therefore, you can't benefit from innocent spouse. In other words, there has to be a joint liability so there are jointly filed returns that you can split the liabilities so that you can have the separation of that tax.

The second element is that does the return have an understatement of tax. If there's no understatement of tax, then there really isn't anything to complain about as far as innocent spouse goes, so that is definitely an element.

What's an understatement of tax? It means a minimization of the tax that was owed. In other words, an error, usually. So an overstatement of tax would mean you paid too much tax and an understatement of tax means you didn't pay enough tax. You didn't self report enough tax and pay enough tax.

The third element for separate liability election is are you legally separated or no longer married to the spouse you filed the joint return with. Now, there are some states (such as Florida, that I'm in) that there is no such thing as a legal separation. You have to be either legally separated or no longer married in order to qualify for the separate liability election. So, in other words, you cannot attain this if you're still married to the alleged guilty spouse.

The fourth and final element for the separate liability election is were you a member of the same household with the guilty spouse within 12 months preceding the filing of the application of innocent spouse. What does that mean? Well, did you live together even though you are actually legally married or legally separated? I think probably the reason that this element is here in this particular statute is because there are people out there, and they ask me all the time "should we get divorced so that we can get out of our tax debt?" No, getting divorced doesn't help you with your tax debt at all. I suppose it could in a separate liability election; in theory, it could help you if you were divorced, but this element here is to make sure that you aren't divorced yet living under the same roof. Surprisingly enough, it's actually pretty common, in my experience, for divorced spouses to live together. Now, why they do that, I don't really understand and I've never really gotten all that good of an answer.