"My Ex Is Supposed to Pay It": Why a Divorce Decree Does Not Bind the IRS

I hear it every week. "The judge ordered him to pay the IRS." "It's in the settlement agreement, she's responsible for the 2021 taxes." And then: "So why is the IRS levying my bank account?"

Because the IRS was not a party to your divorce. Your decree binds you and your former spouse. It does not bind the United States. Understanding that, and understanding where the decree still matters, can save you a lot of money and a lot of grief.

The rule

Internal Revenue Code section 6013(d)(3) says that if a joint return is made, the tax is computed on the aggregate income and the liability is joint and several. That liability was created when you signed the joint return, long before the divorce court said anything about it.

The IRS says this directly in several places:

• IRS Publication 504 says that if you are divorced, you are jointly and individually responsible for any tax, interest and penalties due on a joint return for a tax year ending before your divorce, and that this responsibility applies even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns.
• The Form 8857 instructions say you remain jointly and severally liable, and the IRS can still collect from you, even if you later divorce and the divorce decree states that your former spouse will be solely responsible for the tax.
• Form 8857 itself, at line 7, notes that a divorce decree stating that your former spouse must pay all taxes does not necessarily mean you qualify for relief.

So the decree does not move the debt off your IRS account. Only the IRS, a court with jurisdiction over the tax liability, or the relief provisions of the tax code can do that.

Why this surprises people

Divorce courts divide everything else, so it feels natural that the tax bill gets divided too. Between you and your former spouse, it does. But your liability to the IRS was fixed by the joint return you both signed. The family court divided responsibility between the two of you. It did not change what the IRS is allowed to collect, or from whom, and the IRS does not need your former spouse's cooperation to come after you.

Where the decree does matter

The decree is not binding on the IRS, but it is far from worthless. It matters in at least four places in federal tax law.

1. The legal obligation factor in equitable relief

Revenue Procedure 2013-34, section 4.03(2)(d), makes legal obligation one of the factors the IRS weighs in an equitable relief request under section 6015(f). A legal obligation is an obligation arising from a divorce decree or other legally binding agreement. The factor:

• weighs in favor of relief if your former spouse has the sole legal obligation to pay the outstanding income tax under the decree or agreement;
• is neutral if you knew or had reason to know, when you entered into the decree or agreement, that your former spouse would not pay;
• weighs against relief if you have the sole legal obligation;
• is neutral if both spouses are obligated, if you are not separated or divorced, or if the decree is silent.

The revenue procedure adds that if your former spouse has been relieved of the liability in bankruptcy, that discharge is disregarded in deciding who has the sole legal obligation.

This is why the wording of the decree matters. A clear, specific allocation of the tax debt to your former spouse is evidence in your equitable relief claim. A silent decree is neutral. A decree that puts the tax on you hurts.

2. Marital status

Your divorce itself is a factor. Revenue Procedure 2013-34 treats being no longer married as favoring relief in equitable relief cases and as an element of streamlined relief. Divorce also makes you eligible to elect separation of liability under section 6015(c)(3)(A). See the guide to separation of liability.

3. Property transfers under the decree

Under section 6015(c)(4), your share in a separation of liability case can be increased by the value of disqualified assets your former spouse transferred to you. Transfers within a certain window before the first letter of proposed deficiency are presumed to be for tax avoidance. But section 6015(c)(4)(B)(ii)(II) says the presumption does not apply to a transfer made under a decree of divorce or separate maintenance or a written instrument incident to such a decree.

4. Ownership evidence

Separation of liability allocates items based on who earned the income or owned the business or investment. Divorce papers, financial affidavits and property schedules often document exactly that. They can be some of the best evidence you have.

What to do if your former spouse is not paying

If you are being collected from on a joint liability that your decree assigned to your former spouse, the federal tax question is whether you qualify for relief under section 6015. Request it on Form 8857, attach the entire decree as line 7 of the form requires, and make sure the IRS sees the provision assigning the debt.

If the tax was correctly reported and simply not paid, your path is equitable relief. The guide to equitable relief for unpaid tax explains it. If the problem is an audit adjustment from your former spouse's income or deductions, all three types of relief may be on the table.

Separately, talk with your family law attorney about enforcing the decree against your former spouse. That is a state court question, and it runs on its own track.

If you are divorcing now

If your divorce is not final yet, you have an opportunity most people miss. The guide to negotiating tax debt in a divorce settlement covers what to put in the agreement. In short: identify every joint tax year, deal with known and unknown liabilities, and make the allocation explicit. A decree that is silent on taxes gives you a neutral factor. A decree that speaks clearly gives you a favorable one.

A quick example

Suppose a couple divorced last year. The decree says the husband will pay the balance on their joint return for an earlier year, which correctly reported the tax but was never paid. He does not pay. The IRS sends the wife a notice of intent to levy.

The decree does not stop the levy. What she can do is file Form 8857 requesting equitable relief, attach the entire decree, and explain that she reasonably expected him to pay. Under Revenue Procedure 2013-34, the decree assigning him the sole obligation weighs in her favor, unless she knew or had reason to know when she signed it that he would not pay. Her divorce weighs in her favor too. Filing also triggers the levy restriction in section 6015(e)(1)(B) for that liability while her request is pending.

What about the years after the divorce

The decree affects joint returns already filed. For the year of the divorce and after, your filing status changes. Under section 7703(a), your marital status is generally determined as of the end of the tax year, and a person legally separated under a decree of divorce or separate maintenance is not considered married. Publication 504 says you are unmarried for the whole year if you have obtained a final decree of divorce or separate maintenance by the last day of the tax year. File your own return, and the joint liability problem stops growing.

Practical drafting points for the decree

If the decree is still being negotiated, a few points make it more useful later:

• Name the years. "All federal income tax liabilities for joint returns for 2021 through 2024" is clearer than "all tax debts."
• Cover interest and penalties. Say whether the allocation includes them.
• Address future audits. Say who is responsible for any additional tax later assessed on a joint year.
• Make transfers under the decree. Property transfers made under the decree are excluded from the disqualified asset presumption in section 6015(c)(4).
• Plan the payment. An assignment to a spouse with a history of not paying may be neutral under Revenue Procedure 2013-34 if you knew that spouse would not pay.

The guide to negotiating tax debt in a divorce settlement goes deeper on each of these.