Divorce, Taxes And Other Debts

When parties divorce, their Property Settlement Agreement must address issues related to taxes. This includes but is not limited to Agreements on dependent deductions (which are different for State and Federal taxes currently under the tax law in New Jersey), how to file and when the parties no longer will file a joint tax return. There are tax implications to the distribution of retirement investments and savings, calculating alimony, deferred pension benefits and other matters which should be addressed.

If during the marriage, a joint tax return has been filed, both parties are responsible, even if one spouse was the earner and the other spouse only signed the tax return. We strongly advise that any spouse signing a tax return review it. Even if one spouse “agrees” to be responsible for the problems arising out of the tax return, this may not be adequate. The responsibility of each spouse to pay taxes due is to the Internal Revenue Service.

If there is money due on a previously filed tax return, each spouse can be individually liable for the entire debt consisting of the tax due, interest and penalties. Thus, the housewife can be fully liable for the tax due from her husband’s income.

One can try to qualify for Innocent Spouse Relief or Allocating Liability or for Equitable Relief with the Internal Revenue Service or State taxing authority.  These, however, are very high burdens to meet. If you know or should have known of unreported income or other inconsistencies in reporting or benefitted from this income in some way, it is not critical that you know the exact amount or exactly where it came from to be responsible for the taxes.

In relation to the divorce, once a party signs a joint tax return when still married, they each still have individual liability for taxes due after the divorce. Similarly, if one’s name appears on a mortgage, that person is liable to the lender even if the other spouse agrees to indemnify the other spouse. The contract is with the lender who is also the creditor.   If your spouse is still in the house and doesn’t pay the mortgage your credit will be affected. It is best to push for a refinance or sale to limit liabilities.  The same applies to joint credit cards. Each person is separately liable to the credit card company for the debt. A Property Settlement Statement should seek to properly address these issues to limit liability if possible.

For a free half hour consultation call Helfand & Associates at 973-428-0800, 0ur experienced matrimonial attorneys, handling all aspects of Family Law.  The firm handles alimony, child support, child custody for fathers and mothers, complex financial and business divisions in divorce as well.  The firm works with clients throughout New Jersey and New York.  New Jersey offices located in Whippany and Paramus.

Tanya N. Helfand, Esq. is a Certified Matrimonial Attorney, a Mediator and Panelist in the Morris and Essex County ESP Programs.  The firm welcomes your questions and inquiries at [email protected]. We handle cases in Bergen, Essex, Morris, Hudson, Union, Somerset, Sussex and other New Jersey counties.