When married taxpayers sign a joint return, it may happen that one of the taxpayers incurs a tax debt without the knowledge of the other taxpayer. In such cases, it would be unfair to hold the innocent spouse liable for the other spouse’s mistakes. For those situations, the IRS provides innocent spouse relief and here we will explain how it works and what to do to apply for it.
Innocent Spouse Relief Defined
Innocent spouse relief is an IRS procedure that relieves you from paying taxes, interest, and penalties if your spouse or former spouse didn’t report income, reported income incorrectly or claimed improper deductions or tax credits.
Usually, the taxes, interest, and penalties that qualify for spouse relief can only be collected from your spouse or former spouse. However, you are jointly and individually liable for taxes, interest, and penalties to which relief does not apply.
How to apply for Innocent Spouse Relief?
If you think you can request innocent spouse relief, follow the steps below to apply for it.
1. Check if you qualify for innocent spouse relief
The first step before applying for this tax relief program is to verify if you qualify for it. According to IRS, the following requirements must be met in order for innocent spouse relief to be granted:
a) You filed a joint return which has an understatement of tax due to erroneous items of your spouse or former spouse.
b) At the time you signed the joint return, you did not know that the tax had been underestimated.
c) Considering all the facts and circumstances, it would be unfair to hold you liable for the tax understatement.
d) You and your spouse or former spouse have not transferred assets to each other as part of a fraudulent plan.
2. Prove that it would be unfair to hold you liable for the tax understatement
In order to prove that it would be unfair to hold you liable for your spouse’s mistakes, the IRS must consider the following:
a) Have you been abandoned, divorced, or separated from your spouse?
b) Have you benefited (beyond normal support) from your spouse’s omitted income?
If you can answer “yes” to the first question and “no” to the second, then the IRS may consider innocent spouse relief enforcement to relieve you from paying taxes.
3. Apply for innocent spouse relief
To apply for innocent spouse relief you must file the IRS Form 8857. Be aware that if you lie, you may be penalized for perjury.
Once the form is filed, the IRS will notify your spouse or former spouse that you requested innocent spouse relief. It will also allow your spouse to provide relevant information about your claim.
If the IRS determines that you were aware of the errors on the joint return at the time you signed it, you will not qualify for innocent spouse relief. However, if they cannot find proof that you were aware of it, the IRS will give you this tax relief help so that you receive full forgiveness of all tax debt owed on that specific return.
Other Tax Relief Alternatives for Spouses
In addition to innocent spouse relief, the IRS provides other tax relief alternatives for spouses:
Separation of Liability Relief
This tax relief help is for spouses that are divorced or legally separated and it assigns a portion of the tax debt to each spouse.
According to the IRS, to qualify for separation of liability relief, you must have filed a joint return and must met one of the following requirements at the time you request relief:
a) You are divorced or legally separated from your spouse.
b) You are widowed.
c) You have been living apart from the spouse with whom you filed the joint return for at least 12 months.
In addition to this, you must not have had actual knowledge of the error in the joint return at the time you signed it, unless you can prove that you signed the return under duress.
If you meet the requirements, then you qualify for separation of liability relief and you can apply for it by filing IRS Form 8857.
If you do not qualify for innocent spouse relief or separation of liability, you may still be relieved from taxes, interest, and penalties through equitable relief. However, you must meet all of the following conditions to qualify for this tax relief program:
a) You are not eligible for innocent spouse relief or separation of liability.
b) You and your spouse or former spouse did not transfer property to each other as a part of a fraudulent scheme.
c) You did not file or fail to file your return with the intent to commit fraud.
d) You did not pay the tax.
e) The taxes that you want relief from relates to an item attributed to your spouse. There are some exceptions to this rule:
o You did not know that the tax funds were misappropriated by your spouse or former spouse.
o The item is yours solely due to common property laws.
o The article is in your name, but you can prove that it is not really yours.
o You can show that you were a victim of abuse before signing the tax return.
o You establish that your spouse’s or former spouse’s fraud is the reason for the errors on the joint return causing the tax underestimation.
If you meet all these requirements, then you can apply for equitable relief by filing IRS Form 8857.
Please, be sure to consult with a tax professional for advice and establish the best debt forgiveness program for your particular situation.