Unpaid Taxes, Un-filed Taxes, and Outstanding Tax Obligations
One of the ticking time bombs that can explode after a divorce is finalized is the issue of unpaid or unfiled joint or individual taxes. If you and your spouse file joint taxes during the marriage and you have any concern that your spouse may have underreported their income, or that they may have any outstanding tax liabilities you should protect yourself in the settlement agreement with language which indemnifies you from any action brought by a taxing authority against you. This situation arises often times when one spouse owns a small business and their record-keeping, reporting, and payment has been sub-par. It also occurs when one spouse is in the habit of paying taxes on an installment basis during the course of the marriage. A similar situation arises when spouses file jointly and there is a joint tax obligation outstanding. A post-divorce tax audit can also lead to an assessment of penalties and interest. In all of these situations allocation has to be made as to who will pay the taxes (including any penalties and interest) to the taxing authorities.