Innocent Spouse Tax Relief

Innocent Spouse Relief

What if your spouse or ex-spouse lied about their income or underpaid taxes without your knowledge on a past joint tax return and now you are being held responsible for someone else's tax debt? In that case, you can apply for Innocent Spouse Relief. If you qualify for Innocent Spouse Relief, you will not be responsible for your spouse or ex-spouse's unpaid taxes. When you signed the joint return, you did not know (and had no reason to know) that the return was incorrect.

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All of the following conditions are required to qualify for innocent spouse relief:

• A married filing joint tax return that has an incorrect tax amount which is solely attributable to your spouse's erroneous tax items, such as income received by your spouse but not reported on the joint tax return. Tax deductions, tax credits, and property basis are also erroneous items if they're incorrectly reported on the joint return.
• You must prove that, at the time you signed the joint return, you didn't know, and had no reason to know, that incorrect statements were entered on the tax return.
• You must show that, taking into account all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax liability.

The IRS will ask you to notify the spouse you filed the married filing joint return(s) with of your relief request and allow that spouse to provide information for consideration regarding your claim.

The application for innocent spouse relief must completed via Form 8857 no later than 2 years after the date the IRS first attempted to collect the taxes in question from you.

Separation of Liability Relief

Besides having filed a married filing joint tax return, one of the following requirements must be met in order to qualify for separation of liability relief:

• You're legally separated or divorced from the spouse with whom you filed the married filing joint tax return.
• You're filing as widowed.
• You haven't been a member of the same household as the spouse with whom you filed the married filing joint tax return at any time during the 12-month period ending on the date you request relief.

Furthermore, you must show that you did not have actual knowledge of the item or issue that gave rise to the deficiency at the time you signed the joint return, unless you can prove you were asked to sign the joint tax return under duress.

In this case, the IRS will assign a certain amount of the tax liability to you and a certain amount to your ex-spouse. You will only be responsible for your portion of the tax debt along with a portion of the interest and tax penalties.

The IRS will ask you to notify the spouse you filed the married filing joint return(s) with of your relief request and allow that spouse to provide information for consideration regarding your claim.

The application for separation of liability relief must completed via Form 8857 no later than 2 years after the date the IRS first attempted to collect the taxes in question from you.

Equitable Relief

There are many circumstances which may disqualify you from classic Innocent Spouse Relief or the Separation of Liability Relief, but should not keep you from getting the tax relief you deserve.

• Examples include having had to file separately due to state community property laws and having had knowledge of your spouse's tax fraud—even if you were afraid to question your spouse about it due to fear of physical abuse. The IRS may grant you Equitable Relief in some of these situations.
• There is a long list of rules that guide the IRS on whether to grant Equitable Relief. Generally, you may qualify for it if you did not sign the fraudulent joint return with the intention of committing fraud, or if you signed it under duress (for example, if you were an abused spouse). If the IRS grants you Equitable Relief, you may not be held responsible for the unpaid taxes and you may even get a refund of some of what you have already paid. Under IRS guidelines, there is no time limit on claims of Innocent Spouse Equitable Relief. This means that if you did not request relief for an earlier year due to the old 2-year time limit on claims, you may now make a request. Also, if you did make a claim and it was rejected because of the time limit, you may now make a new request.

The IRS will take into account abuse and financial control by the non-requesting spouse in determining whether equitable relief is warranted. You might also be asked to notify the spouse you filed the married filing joint return(s) with of your relief request and allow that spouse to provide information for consideration regarding your claim.