Innocent spouse relief: Are you responsible for your spouse’s tax mistakes?

When married taxpayers sign a joint return, they are jointly and severally liable for the taxes owed on the return.

Oftentimes a spouse will fail to report income or claim improper deductions or credits, without the other spouse knowing. In such cases, it might be grossly unfair to hold the innocent spouse liable for the other spouses’s mistakes.

The IRS provides three types of relief for such taxpayers: 1. Innocent spouse relief, 2. Separation of liability relief, and 3. Equitable relief.

Innocent Spouse Relief

Follow the steps below to see if you qualify for innocent spouse relief.

Step 1: Do you qualify for innocent spouse relief?

There are several requirements that must be met for a taxpayer to qualify for innocent spouse relief:

  1. Did you file a joint tax return?
  2. Has it been less than 2 years after the IRS first attempted to collect the tax?
  3. Does your joint tax return have understated tax due to false deductions or missing income related to your spouse?
  4. When you signed the return, did you know or have reason to know that there was understated tax?

If you answered ‘yes’ to #1-3 and ‘no’ to #4, then move onto Step 2. Otherwise, you do not qualify for innocent spouse relief, but you may qualify for separation of liability or equitable relief, further below.

Step 2: Can you show that it would be unfair to hold you liabile?

Whether it would be inequitable (“unfair”) to hold you liable for your spouse’s mistakes depend on the facts and circumstances. Among the factors that the IRS will consider are:

  • Have you have been deserted, divorced, or separated from your spouse?
  • Have you benefited (beyond normal support) from your spouse’s omitted income?

If you’re able to answer yes to #1 and no to #2 you may have a case for innocent spouse relief.

Step 3: Apply for innocent spouse relief

To apply for innocent spouse, file IRS Form 8857.

Separation of Liability Relief

Separation of liability relief is for spouses that are married but separated. In order to qualify for separation of liability relief, the following requirements must be met:

  1. You must have filed a joint return for the year you are seeking relief.
  2. It must be less than 2 years since the IRS first attempted to collect the tax.
  3. The joint return must have an understated tax (e.g., unreported income, or erroneous deductions)
  4. You must be still married to your spouse, but legally separated or living apart for at least 12 months.
  5. You must not have had actual knowledge of at least some of the understatement of tax due to your spouse’s erroneous items.

To apply for separation of liability relief, file IRS Form 8857.

Equitable Relief

If you do not qualify for innocent spouse relief or separation of liability relief, then follow the steps below to see if you qualify for equitable relief.

Step 1: Do you qualify for equitable relief?

There are several requirements that must be met for a taxpayer to qualify for equitable relief:

  1. Does your return have an understated or unpaid tax?
  2. Is the income tax liability due to an underreporting of income or a deduction or credit relating to your spouse; or is there unpaid tax resulting from (either in full or in part) an item of your spouse?

If you answered ‘yes’ to #1 and 2, move on to step 2.

Step 2: Can you show that it would be unfair to hold you liabile?

Whether it would be inequitable (“unfair”) to hold you liable for your spouse’s mistakes depend on the facts and circumstances. Among the factors that the IRS will consider are:

  • Have you have been deserted, divorced, or separated from your spouse
  • Have you benefited (beyond normal support) from your spouse’s income

If you’re able to answer yes to #1 and no to #2, move onto step 3.

Step 3: Did you transfer property to each other?

You cannot have transferred property to each other as part of a fraudulent scheme or with the main purpose of avoiding tax or the underpayment of tax.

If you have not transferred property to each other in a fraudulent scheme, then you may qualify for equitable relief.

Step 4: Apply for equitable relief

To apply for equitable relief, file IRS Form 8857.

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