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Differences between an “innocent spouse” and an “injured spouse”

There are obvious tax benefits for a married couple to file taxes jointly instead of individually. There are credits, deductions and exemptions that only spouses qualify for. Generally, joint tax returns save time, money and effort; it’s a “one and done” proposition, and doesn’t require duplicative effort for each partner to submit his or her own individual return.

Joint tax returns result in what is known as “joint and several” liability regarding any tax debt. This means that the IRS can collect any taxes due from both spouses (or either, if one is insolvent or unavailable).

Sometimes, one spouse will attempt to evade or avoid taxes to the detriment of the other. The other spouse may have no idea that anything untoward or illegal is occurring. If one partner does not know – and has no reason to suspect – that tax evasion or fraud is happening, it’s possible that he or she might be able to avoid legal responsibility by requesting either “injured spouse” or “innocent spouse” relief through the IRS.

Injured spouse

Because California is a community property state, certain conditions must be met before a still-married spouse can request relief for their partner’s tax liability. If, for example, one spouse had a judgment filed against him or her for a pre-marital debt, the IRS could seek to withhold the couple’s joint refund to satisfy the debt. In that case, it may be possible for the spouse who doesn’t owe the debt to reclaim a portion of the refund as non-community property.

Innocent spouse

If one spouse has purposely withheld income, evaded taxes or committed tax fraud without the other spouse’s knowledge, and the two are now divorced, innocent spouse relief may apply. If applicable, innocent spouse relief gets one spouse off the proverbial hook for tax-related crimes committed by the other. High-profile tax evasion and fraud cases, such as those involving the infamous Wyly brothers and John DeLorean, brought the innocent spouse debate into the public eye.

Of course, attempting to get either of these types of relief can be difficult and tedious. Consult an experienced tax attorney to help determine which is best for you and to guide you through the process.

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