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Divorce agreements not binding on IRS

Georgia residents sometimes enter into tax-sharing agreements through which two parties agree to be responsible for paying a certain percentage of the tax liabilities owed. These types of agreements or orders are common in divorce cases. As a 2017 case demonstrates, the agreements are not binding on the Internal Revenue Service.

In the case, the IRS disallowed some rental property loss deductions that two former spouses had claimed on their joint income tax returns before they divorced. The ex-spouses asked the tax court to relieve them of joint and several liability for the tax liabilities that resulted from the disallowance.

In their divorce, the parties had negotiated an agreement that the ex-wife would be responsible for paying 28 percent and 41 percent of the liabilities for each of the two years in question. The ex-husband was responsible for paying the balance of those liabilities. The parties asked the court to order the percentages that they had agreed to in their divorce rather than each being 50 percent responsible, but the court refused. In its ruling, it reminded the parties that state court agreements and orders are not binding on the U.S. Tax Court.

When people are negotiating divorce agreements, they should understand that regardless of what thy agree to concerning their taxes, the IRS may override the agreement. People who have tax debts might want to consult with tax law attorneys for help with negotiating directly with the IRS. Attorneys may be able to secure agreements for their clients to settle their tax debts by paying less than the full amount owed. They may also be able to negotiate payment plans with the IRS that are affordable for their clients.

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