Married taxpayers who file joint tax returns are jointly liable for any and all resulting tax debt on their tax return. Since this significantly affects the financial situation of both married taxpayers who file jointly, the IRS introduced Innocent Spouse Relief to help.
Relief From Joint Tax Liability
The IRS offers relief from joint tax liability under very specific circumstances. If you’ve been charged with a tax debt that is actually the responsibility of your spouse, you may be eligible for Innocent Spouse Relief. In order to qualify, you must be able to prove that you had no part in the actions that caused your spouse’s tax problems in the first place. In a situation like this, a spouse can be relieved of the tax, interest, and penalties on a joint return.
Innocent Spouse Relief
Married taxpayers often file jointly because of the benefits this filing status affords. In the case of a joint return, both taxpayers are liable for the tax and any interest or penalties, even if they later separate or divorce. Joint and Several Liability means that each taxpayer is legally responsible for the entire liability. This is true even if only one spouse earned all the income. In some cases, however, a spouse who filed a joint return can receive relief from joint and several liability.
Innocent Spouse Relief is a viable resolution strategy when a joint return has understated tax liability due to erroneous items attributable to a taxpayer’s spouse or former spouse. Erroneous items include income received by a spouse that is omitted from the return. Deductions, credits, and property basis are also erroneous items if they are incorrectly reported on the joint return. Additionally, the taxpayer must request relief within two years after the date on which the IRS first began collection activity.
To be considered an innocent spouse, the taxpayer must meet all of the following conditions:
- You filed a joint return that has an understatement of tax (deficiency) that’s solely attributable to your spouse’s erroneous item. An erroneous item includes income received by your spouse; but omitted from the joint return. Deductions, credits, and ‘property basis’ are also erroneous items if they’re incorrectly reported on the joint return.
- You establish that at the time you signed the joint return you didn’t know, and had no reason to know, that there was an understatement of tax, AND
- Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax.
Injured Spouse vs. Innocent Spouse
It’s a common misconception that an injured spouse is the same as an innocent spouse. For purposes of clarification, an injured spouse claim is for allocation of a refund of a joint return while innocent spouse is for relief or allocation on the joint and several liability of a joint return. You’re an injured spouse if all or part of your share of a refund from a join return was or will be applied against the separate past-due federal tax, state tax, child or spousal support, or federal non-tax debt (such as a student loan) owed by your spouse. If you’re an injured spouse, you may be entitled to recoup your share of the refund.