Innocent Spouse Defense
When you file a joint income tax return, the Internal Revenue Code makes you and your spouse equally liable for the full tax, penalties and interest. This is called joint and several liability. Joint and several liability applies not only to the tax shown on the original return but to any additional tax liability the IRS later determines to be due, even if the additional tax is due to income, deductions or credits of your spouse or former spouse. You remain jointly and severally liable for the tax and IRS can collect from you, even if you later divorce and the divorce decree states that your former spouse is solely responsible for all of the tax. Even if your spouse owed tax prior to your marriage and all returns filed since your marriage showed refunds or no tax due, you can be affected by your spouse’s prior tax liability.
In some cases, a spouse (or former spouse) will be relieved of the tax, penalties and interest on a joint tax return. There are four types of relief available for spouses who filed a joint tax return.
- Innocent Spouse Relief
- Separation of Liability Relief
- Equitable Relief
- Injured Spouse Relief
A complete explanation of each type of relief is impossible here due to space limitations and the complexity of the issues involved. We will however, give you a brief explanation of each type of relief available. Our Associates have been specifically trained to determine if you qualify for relief under any of the above situations. If you do qualify for the relief, the Associate assigned your case also has the expertise to document and present your case to the IRS in the best possible format for a successful determination by the IRS. If you believe you do qualify, contact us immediately. There is a specific time line in which your request must be submitted or your right to the relief, whether you qualify or not, will be lost.
Innocent Spouse Relief – You can be relieved of responsibility for paying the tax, interest and penalties if your spouse, or former spouse, improperly reported items or omitted items on your original tax return. Generally, the tax, penalties and interest that qualify for relief can only be collected from your spouse, or former spouse. You must meet all of the following conditions to qualify for Innocent Spouse relief:
- You filed a joint return.
- There is an understated tax on the return that is due to erroneous items of your spouse or former spouse.
- You can show that when you signed the joint return you did not know, and had no reason to know, that the understated tax existed.
- Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understated tax.
Separation of Liability Relief – Under this type of relief, the understated tax on your joint return is allocated between you and your spouse or former spouse. The understated tax allocated to you is generally the amount you are responsible for. This type of relief is available only for unpaid liabilities resulting from the understated tax. Refunds are not allowed.
To request Separation of Liability Relief, you must have filed a joint return and meet either of the following requirements at the time you file your request for relief:
- You are no longer married to, or are legally separated from, the spouse with whom you filed the joint return for which you are requesting relief.
- You were not a member of the same household as the spouse with whom you filed the joint return at any time during the 12-month period ending on the date you file for relief.
Equitable Relief – If you do not qualify for Innocent Spouse Relief or Separation of Liability Relief, you may still be relieved of responsibility for the tax through Equitable Relief.
Unlike Innocent Spouse Relief or Separation of Liability Relief, you can get Equitable Relief from an understated tax or an underpaid tax. An underpaid tax is an amount of tax you properly reported on your return but you have not paid.
You must meet all of the following conditions to qualify for Equitable Relief:
- You are not eligible for Innocent Spouse Relief or Separation of Liability Relief.
- You have an understated or underpaid tax.
- You have not paid the tax.
- You establish that, taking into account all the facts and circumstances, it would be unfair to hold you liable for the understated or underpaid tax.
- You and your spouse or former spouse did not transfer assets to one another as part of a fraudulent scheme.
- Your spouse or former spouse did not transfer property to you for the main purpose of avoiding tax or the payment of tax.
- You did not file or fail to file your return with the intent to commit fraud.
- The income tax liability from which you seek relief must me attributable to an item of the spouse or former spouse with whom you filed the joint return.
Injured Spouse Relief – If you owe no taxes to the IRS and you file a joint tax return with your current spouse who does owe tax to the IRS, a state taxing agency, past due child support or a student loan, your portion of the refund due on a jointly filed tax return will normally be applied to your spouse’s past due liability. If you do not owe the IRS and you wish to receive your share of any tax refund, you can apply for Injured Spouse Relief.
Applying for relief under any of the above provisions is very complex. There are many conditions that must be met to qualify and as always, documentation and presentation is extremely important for success in achieving relief from the tax, penalties and interest. Representation by a knowledgeable tax professional is paramount to your chance of success. Our Associates will advise you if you qualify and your chance of success in applying for each of the areas of relief IRS grants.