More and more inquiries are made to Orange County tax attorneys all the time about innocent spouse relief. Many married taxpayers choose to file a joint tax return because of the benefits of filing jointly. However, both spouses have “joint and several” liability for the taxes and for any interest or penalties on the tax, even if they do not stay married. This means that each spouse is legally responsible for the entire liability. Even if a divorce decree spells out which former spouse will pay any money due on past tax returns, strictly speaking the IRS is not bound by the decree.
But there are ways for spouses to get relief from joint and several liability. There are three types of relief from joint and several liability for spouses who filed joint returns:
- Innocent spouse relief: Relief from additional tax you owe if your spouse or former spouse failed to report income, reported income improperly or claimed improper deductions or credits.
- Separation of liability relief: Allocates tax between you and your spouse or former spouse.
- Equitable relief: This may apply when you do not qualify for innocent spouse relief or separation of liability relief for something not reported properly on a joint return.
The relief must be requested within two years of the date the IRS first attempted to collect the tax from you.
Here are the conditions to qualify for “innocent spouse relief”:
- There was a joint return with an understatement of tax due to your spouse’s erroneous items. Erroneous items include leaving income off the return, or incorrectly reporting credits, deductions, etc.
- You can show that when you signed the joint return you did not know, and had no reason to know, about the understatement of tax.
- You can show that it would be unfair to hold you liable for the understatement of tax.
Here are the conditions to qualify for “separation of liability relief”:
You filed a joint return, had no knowledge of the understatement of tax, and now meet one of the following:
- You are divorced or legally separated from the spouse you filed with
- You are widowed, or
- You have not been a member of the same household as the spouse with whom you filed the joint return at any time during the 12-month period before seeking relief.
To qualify for “equitable relief” you must establish, under all the facts and circumstances, that it would be unfair to hold you liable for the understatement or underpayment of tax. In addition, you must meet other requirements listed in Publication 971, Innocent Spouse Relief.
IRS Publication 971, Innocent Spouse Relief, has more information. Form 8857 is the Request for Innocent Spouse Relief.
If you lived in California and filed as “married filing separate” rather than “married filing jointly,” you might still qualify for relief.
Source: IRS.gov “Innocent Spouse Relief (And Separation of Liability and Equitable Relief)”