Innocent Spouse Relief: Know the Requirements

Innocent Spouse Relief may be available to an individual who filed a joint return with their spouse if there was an additional tax assessed to their return due to an understatement of tax attributable to the other spouse. If such relief is granted then the innocent spouse would be absolved of the portion of the overstatement of the tax that was attributable to the other spouse.

Three types of Innocent Spouse Relief are available under Internal Revenue Code 6015. The three types of relief are known as Innocent Spouse Relief, Separation of Liability and Equitable Relief.

Under Innocent Spouse Relief the innocent spouse may be granted relief if they can establish that the understatement in the tax was attributable to the other spouse, such as failing to report income or overstating deductions, that they did not know or have reason to know at the time of signing the return that there was an understatement of tax and that taking into consideration all factors, it would be unfair to hold the innocent spouse liable for the understatement of the tax.

Under Separation of Liability the innocent spouse must be divorced or separated from the spouse they filed the joint return with, be widowed or must not have resided in the same household for the 12 month period prior to the filing of the innocent spouse claim. In addition, the innocent spouse must not have had actual knowledge of the understatement of the tax at the time they signed the joint return.

A claim under either Innocent Spouse Relief (Internal Revenue Code 6015(b)) or Separation of Liability (Internal Revenue Code 6015(c)) must be filed within two years of the date the IRS began to collect on the tax. A few examples of activities that would start the two-year period would be an offset of a refund to pay the tax or the issuance of a Final Notice of Intent to Levy.

If the taxpayer is not eligible for relief under Innocent Spouse Relief or Separation of Liability then they may still file a claim under Equitable Relief under Internal Revenue Code 6015(f). To be granted relief under Equitable Relief the innocent spouse must demonstrate that under the facts and circumstances it would be inequitable to hold that spouse liable for the understatement of the tax.

Some of the factors the IRS will consider in whether to grant Equitable Relief include, whether the innocent spouse gained a significant economic benefit from the understatement of the tax, their compliance with tax laws, whether it would cause an economic hardship to hold the innocent spouse liable, the mental and physical health of the innocent spouse, whether the innocent spouse was the victim of spousal abuse, whether the innocent spouse know or had reason to know of the understatement of the tax at the time they signed the joint return, the marital status of the innocent spouse and whether either spouse has a legal obligation to the pay the tax, such as through a divorce decree.

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