Innocent Spouse. When it comes to filing your taxes, there are a number of ways to file.
You can file single, married filing jointly, qualifying widow/widower, married filing separately, or head of household. Many married couples elect to file jointly as it provides certain tax benefits when using this filing status.
When married couples file jointly, they are both jointly and severally liable for the tax as well as any additions to the tax such as interest and penalties. Jointly and severally liable means that each taxpayer, regardless of who specifically owes the money, is responsible for the entire liability. Therefore, if one spouse incorrectly files or improperly claims deductions or credits, both spouses are held accountable. Unfortunately, this is also true if the couple is going through a divorce.
This can present a huge issue for spouses left with a joint tax liability. However, if you find yourself in this position, there are options. You may be able to qualify for the IRS Innocent Spouse Program.
There are THREE different types of relief:
- The first type of relief, the Innocent Spouse Relief, provides relief from additional taxes owed if your spouse or former spouse failed to report income properly or improperly claimed deduction and credits.
- The Separation of Liability Relief provides allocation of additional taxes owed between you and your spouse or former spouse when an item was not reported properly. With this option, you are only responsible to pay the amount allocated to you.
- If you do not qualify for Innocent Spouse Relief or Separation of Liability, you may apply for Equitable Relief.
Each of the programs has different qualifications in order to be granted relief. If you qualify for relief, you will have the joint liability fully or partially removed from your name. If your liability is fully removed, you will no longer be associated with or responsible for the outstanding tax liability.
It’s important to note that Innocent Spouse Relief is not the same as Injured Spouse Relief. You may be eligible for relief under injured spouse provisions if you filed a joint tax return and all or part of your portion of the over-payment was applied or offset to your spouse’s past-due federal tax, state income tax, child or spousal support, or a federal non-tax debt such as a student loan.
Innocent Spouse Relief
To qualify for Innocent Spouse Relief, you must meet all of the following conditions.
- You must have filed a joint return with an understatement of tax deficiency that can be directly applied to an error made by your spouse. This includes income received by your spouse but not reported as well as improperly reported deductions, credits and property basis.
- You must be able to prove that when you signed the tax returns, you did not know about the errors and you had no reason to know about the errors.
- You must prove that based on your circumstance and all the facts surrounding it, it would be unfair to hold you liable.
Separation of Liability Relief
In order to qualify for Separation of Liability Relief, you must have filed a joint return and meet one of the following qualifications at the time you request relief. You must be divorced or legally separated from the spouse with whom you filed jointly, you must be widowed or have not lived in the same household as the spouse at any time during the period of time in which you’re seeking relief. However, if at the time you filed you had knowledge of the error, you will not be able to qualify for this type of relief .
The third type of relief option is Equitable Relief. To qualify for this relief, you must show that with all the facts and circumstances involved, it would not be fair to hold you liable for taxes owed. In addition to this requirement, you must also meet the requirements listed in the IRS Publication 971, which pertains to Innocent Spouse Relief.
How to Seek Relief
If the IRS is trying to collect taxes related to the income of a current or former spouse and you believe you are eligible for Innocent Spouse Relief, you have a few options. You can try to file by yourself although the statutory requirements of the program can be complicated. If you elect to apply for the program on your own, you will need to complete an IRS Form 8857 or submit a written statement with the information requested per the Form 8857. It’s important to note that the IRS will contact the spouse with whom you filed jointly and notify them about the claim. They will also allow this individual (your spouse) to provide information regarding the claim which might hurt your claim.
HIRE A PROFESSIONAL!
Alternatively you can hire a debt relief professional. A tax debt relief professional will conduct an analysis of your situation and determine if you qualify for full or partial relief under the Innocent Spouse rules and regulations. If you do qualify, they will prepare and submit the claim on your behalf, which eliminates a significant amount of stress from your life while also ensuring your application package is properly prepared and is given the best chance possible of being accepted. If you do not qualify, a tax debt professional will provide you with alternative solutions available to you.