Taxpayers who file joint individual income tax returns with their spouse can, under certain circumstances, be eligible for relief from the obligation to pay the resulting tax liability through the use of so-called “Innocent Spouse Relief.” In order to qualify for Innocent Spouse Relief, you must have: (1) filed a joint return with your spouse or former spouse, (2) your joint return understated the tax due as a result of erroneous items of your spouse or former spouse, (3) you did not know, nor did you have any reason to know, that the tax understatement existed, and (4) it would be unfair to hold you responsible for the understated tax attributable to your spouse’s or former spouse’s items.
In order to apply for Innocent Spouse Relief, a taxpayer files a Form 8857, “Request for Innocent Spouse Relief.” Form 8857 permits to taxpayer to apply for either Innocent Spouse Relief, Separation of Liability Relief, and Equitable Relief. Innocent spouse relief permits a taxpayer, under certain circumstances, to be relieved of responsibility for paying tax, interest, and penalties if your spouse or former spouse improperly reported items or omitted items on your joint tax return. Separation of Liability Relief allocates the understated tax, resulting interest, and applicable penalties between the taxpayer and his or her spouse or former spouse. Equitable Relief permits a taxpayer who is not eligible for either Innocent Spouse Relief or Separation of Liability Relief to be relieved of responsibility for either understated tax or unpaid tax.
A taxpayer should file a Form 8857 as soon as he or she becomes aware of a tax liability for which he or she believes only his or her spouse should be held responsible. The taxpayer must file the Form 8857 no later than two years after the date that the IRS first attempts to collect the tax. Examples of IRS collection activities that start the two year time period include an attempt by the IRS offset your income tax refund against an amount that you owed on a joint return, the IRS’s filing a claim in court where you are a party or the claim involves your property, a filing of a lawsuit by the United States treasury to collect on a joint liability, the issuance of a section 6330 notice of intent to levy on your property.
In order to qualify for Separation of Liability Relief, the taxpayer must no longer be married to, or legally separated from, the spouse with whom he or she filed a joint return for which the taxpayer is requesting relief or the taxpayer must no longer be a member of the same household as the spouse with whom the taxpayer filed a joint return at any time during the 12-month period ending on the date that the taxpayer filed the Form 8857. In order to qualify for Equitable Relief, the taxpayer must be ineligible for either Innocent Spouse Relief or Separation of Liability Relief, must have filed a joint return, must timely file the Form 8857, must not have been involved in fraudulent transfers of assets to avoid tax liabilities, must not have received property from their spouse to avoid payment of tax, must not have knowingly participated in filing a fraudulent return, the income tax must be attributable to the spouse’s or former spouse’s income.
If you would like more information regarding Innocent Spouse Relief, Separation of Liability Relief, or Equitable Relief, you can review IRS Publication 971, “Innocent Spouse Relief,” or call me at 917-817-9001 or e-mail me at email@example.com. This blog posting is not designed to provide you or anyone else with legal advice. If you would like legal advice, please contact me or your attorney.