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26 years marriage. Wife stayed home for 20 of 26 years. Husband owned S-Corp that flowed to their personal taxes, always filed in October after an extension, and never paid the liability. Once the last lien was paid, wife got a job and started filing Married Filing Separately. She doesn't owe, receives a refund, and is in good standing. Husband owes over $550K to the IRS. They placed a lien on the marital home. Home has over $700K in equity. Wife filed for divorce, and they're near the end. Judge orders a 50/50 split of remaining equity, $350K to each. When sold, what will the IRS do? Can or will they take all the equity to satisfy only the husband's back tax liability or will wife get her 350K, husband gets $0 and will still owe the IRS $200K?

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When sold, what will the IRS do? Can or will they take all the equity to satisfy only the husband's back tax liability or will wife get her 350K, husband gets $0 and will still owe the IRS $200K?

That's a question to your attorney. The IRS put the lien on the house before the judge gave the order, and it's not entirely sure why the judge's order didn't address the lien.

As an "innocent spouse" (at least for the MFS years) you got some recourse, but it's not a DIY situation, you got to talk your attorney. If your family law attorney doesn't know - ask them for a referral to a tax attorney.

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  • Thanks. I've done all of the above. No one seems to have an answer and that astonishes me. A family law judge is governing at the county level. The IRS is federal and their laws override county and state laws in the U.S. (in case you're not a US based person). Innocent spouse provision only applies to joint returns. We are MFS, so not applicable. I don't owe it but there's enough equity in the house to pay it. Even the tax attorney doesn't know. My sense is there is no one way they handle this situation but I'm asking here just in case. A family law judge can't dictate IRS actions though.
    – TWilson
    Commented Mar 14 at 17:40
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    @TWilson It can't, but the IRS usually wouldn't go against a family court judgement as long as the debt was considered and attributed to one person. You may end up in a Federal court against the IRS on this, or back in the Family court against your ex, demanding either refund from the IRS or from the ex, depending on what your lawyers would suggest to be the better shot.
    – littleadv
    Commented Mar 14 at 17:43
  • Yeah, that's what I'm trying to avoid by getting clear on IRS collection law or procedure. To no avail so far. Who wants to sue the IRS? I don't. The divorce is enough.
    – TWilson
    Commented Mar 14 at 17:44

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