Ever feel stuck paying for something that wasn’t your fault? When it comes to taxes, this can happen more often than you’d think, especially in joint filings. Luckily, the IRS has specific programs to help. If you’re dealing with unexpected tax debt because of your spouse or ex-spouse, Innocent Spouse Relief might just be your way out. But what exactly are these types of relief, and how do they work? Let’s break it down so you know your rights—and how to protect yourself.
How Did You Get Stuck with This Tax Debt?
When you file a joint income tax return, both you and your spouse are legally responsible for the entire tax liability, a concept known as joint and several liability. This liability covers not only the taxes reported on the return but also any additional amounts the IRS determines are owed, even if those are due to the income, deductions, or credits of your spouse or former spouse. You remain jointly and severally liable for taxes, and the IRS can still collect from you, even after a divorce, regardless of whether your divorce decree specifies that your former spouse is solely responsible for the tax.
IRS Innocent Spouse Relief Options
In some circumstances, however, a spouse (or former spouse) may qualify for relief from tax, interest, and IRS penalties on a joint return. There are four main types of relief available:
Innocent Spouse Relief
Separation of Liability Relief
Equitable Relief
Injured spouse relief
What is Innocent Spouse Relief?
Innocent Spouse Relief is the first of four types of tax relief that protect individuals from being held responsible for errors or misreporting on a joint tax return by their spouse or ex-spouse. This specific relief applies when you had no knowledge or reason to know about the incorrect information on the return, such as unreported income, inflated deductions, or misrepresented credits. If granted, you are relieved from paying any additional tax, interest, or penalties stemming from your spouse’s mistakes.
What Qualifies for Innocent Spouse Relief?
You may be eligible for Innocent Spouse Relief if you meet the following conditions:
You must have filed a joint tax return with your spouse.
The taxes on the return were understated due to errors such as:
Unreported income
Incorrect deductions or credits
Incorrect asset values
You were unaware of the errors when you signed the joint tax return.
If you live in a community property state, additional rules may apply when determining eligibility.
Even if certain factors complicate the situation, such as divorce, the responsibility for taxes remains unless Innocent Spouse Relief is granted. This applies even if:
You have since divorced your spouse.
A divorce decree states that your spouse is responsible for the taxes.
Your spouse earned all of the income.
You are not eligible for this relief if:
You signed an offer in compromise with the IRS.
You signed a closing agreement with the IRS covering the same taxes.
A court has made a final decision denying you relief.
You participated in a related court proceeding and failed to request relief.
How to Request IRS Innocent Spouse Relief
To request IRS Innocent Spouse Relief, you must file IRS Form 8857. This form should be submitted as soon as you become aware of the tax issue related to your spouse or ex-spouse, such as an IRS notice regarding unpaid taxes. When completing the form, you’ll need to provide detailed information supporting your claim that you were unaware of the errors or omissions on the joint tax return, such as unreported income or incorrect deductions. It’s important to file your request within two years of the IRS starting collection activities. Once the form is submitted, the IRS will review your situation and decide if you qualify for innocent spouse relief, relieving you of any responsibility for additional taxes, interest, or penalties that resulted from your spouse’s actions.
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Separation of Liability Relief
This relief is particularly helpful for individuals who have divorced or separated and want to ensure they aren’t liable for their spouse’s tax issues.
Separation of Liability Relief allows you to avoid paying your spouse’s share of understated taxes from a joint tax return if you’re no longer married or living together. This relief divides the additional taxes based on the income and assets of each spouse, making you responsible only for your portion of the tax bill. However, it’s important to note that Separation of Liability Relief does not grant refunds for taxes you’ve already paid. Instead, it only relieves you from paying additional taxes owed due to your spouse’s income or assets.
Eligibility Criteria for Separation of Liability Relief
You may qualify for Separation of Liability Relief if:
You filed a joint tax return with your spouse.
Your tax liability was understated due to mistakes or omissions on the return.
You were unaware of these mistakes when you signed the return.
You are no longer married, legally separated, or living with your spouse. This applies if:
You are legally divorced, separated, or widowed.
You have lived separately from your spouse for the 12 months leading up to your request for relief.
Individuals in community property states who file separate returns may also qualify for this type of relief. For more information, refer to Community Property Laws.
You do not qualify for Separation of Liability Relief if:
You were aware of the errors or understated taxes when signing the joint return.
You or your spouse transferred assets to evade taxes or engage in fraudulent activity.
You’ve signed an offer in compromise with the IRS.
You’ve signed a closing agreement with the IRS regarding the same taxes.
A court has issued a final decision denying your request.
You were involved in a court proceeding but did not request relief at that time.
In some situations, you may be eligible for partial relief if you were unaware of only part of the erroneous items on your joint return.
How to Request Separation of Liability Relief
To request Separation of Liability Relief, you must have filed a joint tax return and meet specific requirements when submitting IRS Form 8857. You qualify if you are no longer married or are legally separated from the spouse with whom you filed the return. This also applies if you are widowed. Another qualification is if you and your spouse have not lived together at any point during the 12-month period before filing an innocent spouse relief form. When submitting the form, it is essential to provide supporting documentation to demonstrate your eligibility. The IRS will carefully assess these details to determine if you qualify for relief. Form 8857 covers all types of relief, including Innocent Spouse Relief, Separation of Liability, and Equitable Relief, so you don’t need to decide which one fits your situation. The IRS will review your information and determine the most appropriate type of relief for which you may qualify.
Not sure about your eligibility? Our free consultation aligns with IRS Publication 971 for the right guidance.
Equitable Relief
Equitable Relief is a type of tax relief available to taxpayers who do not qualify for Innocent Spouse Relief or Separation of Liability Relief but still believe it would be unfair to hold them responsible for their spouse’s or ex-spouse’s tax liabilities. This relief applies to situations where the taxpayer had no knowledge of the errors or understatements on their joint return, or in cases where financial hardship or other unfair circumstances make them eligible. Unlike the other forms of relief, Equitable Relief can apply to both understated taxes and unpaid taxes—the latter referring to taxes properly reported but not yet paid. Additionally, even if you did not file a joint return, you may still qualify if the tax is related to community income.
Eligibility Criteria for Equitable Relief
You may be eligible for Equitable Relief if the following conditions apply:
You do not qualify for Innocent Spouse Relief or Separation of Liability Relief.
You filed a joint tax return with your spouse.
You filed your claim for relief in a timely manner.
Neither you nor your spouse transferred assets to evade taxes or commit fraud.
Your spouse did not transfer property to you to avoid tax or payment of tax.
The tax liability is primarily attributable to your spouse’s income or assets, unless certain exceptions apply (such as community property law).
You did not knowingly file a fraudulent return, nor were you aware of fraudulent activity when filing.
Based on your specific circumstances, it would be unfair to hold you responsible for the unpaid or understated taxes.
An item is attributable to you solely due to community property law.
Funds intended to pay the tax were misappropriated by your spouse for their personal benefit.
You were a victim of spousal abuse or domestic violence, preventing you from challenging the tax return.
The erroneous item leading to the understated tax was due to your spouse’s fraud.
You will not qualify for Equitable Relief if:
You’ve signed an offer in compromise with the IRS.
You signed a closing agreement for the same tax issue.
A court has already made a final decision denying your relief.
You were involved in a related court case and failed to request relief at that time.
Factors Considered by IRS for Granting Equitable Relief
When determining whether to grant Equitable Relief, the IRS evaluates various factors, considering the full circumstances of your case. Key factors include your marital status, with relief more likely if you are no longer married. The IRS will also consider whether paying the tax would cause economic hardship, and whether you had knowledge or reason to know about the errors or unpaid taxes at the time of filing. If you were a victim of abuse or your spouse exercised financial control, this could weigh in favor of relief. The IRS also reviews whether you received any significant benefit from the unpaid tax, your compliance with tax laws in subsequent years, and your mental or physical health during the relevant time periods. None of these factors alone will determine the outcome, but the IRS will use them collectively to decide if granting relief is fair and just.
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Injured Spouse Relief
Injured Spouse Relief allows a spouse to reclaim their share of a federal tax refund that has been reduced to cover the other spouse’s overdue debts, such as past-due child support, debts to federal agencies, state income tax obligations, or state unemployment compensation debts. If your refund has been applied to these types of debts for which you are not responsible, you can file IRS tax form 8379 to have the IRS allocate the refund correctly and return your portion to you. Unlike Innocent Spouse Relief, which addresses errors or misreporting on a joint return, Injured Spouse Relief is specifically for protecting your refund from being used to cover your spouse’s financial obligations.
Eligibility Criteria for Injured Spouse Relief
You may qualify for Injured Spouse Relief if the following conditions apply:
You filed a joint tax return with your spouse.
Your tax refund was used to cover your spouse’s overdue debts, such as child support, federal or state obligations, or other government debts.
You are not responsible for the debt in question.
In some cases, individuals in community property states who file separate returns may also be eligible.
When and How to Request Injured Spouse Relief
To request Injured Spouse Relief, it’s essential to file IRSinjured spouse form within specific time limits. Generally, you should file the form within three years from the date you submitted your joint tax return or two years from the date you paid the tax, whichever is later. If you didn’t file a return, you have two years from the date the tax was paid to request relief. Certain exceptions may apply, and you can find more details on extended time periods under Internal Revenue Code Section 6511.
When requesting relief, complete Form 8379 (Injured Spouse Allocation). You can file it along with your tax return either electronically or by mail, or send it separately if you receive notice that your refund was used to cover your spouse’s debts. Ensure that your taxpayer identification numbers are in the same order as on your joint return, and carefully follow the form’s instructions. Don’t forget to include all necessary documentation, such as W-2s and 1099s.
Remember, if you need to claim relief for multiple years, you’ll need to file a separate Form 8379 for each year. Send the completed form to the IRS Service Center where you originally filed your tax return.
The process of filing for Injured Spouse Relief can be complex, with strict deadlines and essential documents that must be carefully managed. Missing a key document or filing after the deadline can delay or deny your relief. Let J David Tax Law handle everything for you.
Your Tax Relief Questions, Answered
