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Innocent Spouse Relief: What You Need to Know

September 15, 2014

You dream of meeting someone special to spend your life with.  Then you meet the perfect person.  You get married and start planning a life together.

 

Then things go south. 

 

Maybe your spouse starts a business and makes some shady decisions. Maybe he or she takes deductions that shouldn't have been claimed. But if you do everything right, do you have to be punished along with your spouse?

 

No, you don't. You can file with the IRS for something called Innocent Spouse Relief. This provision relieves of having to pay the taxes, interest, and penalties that would be incurred as a result of your spouse's improper reporting on your joint tax return.

 

Types of Relief

 

There are three types of relief: 

  1. Innocent Spouse Relief. This frees you from paying any additional tax owed as a result of your spouse failing to report all income, reporting it incorrectly, or improperly claiming deductions or credits.

  2. Separation of Liability Relief. This allocates additional tax owed between you and your former spouse (or current spouse, if you are separated) that arises as a result of an item not properly reported on a joint return.

  3. Equitable Relief. If you do not qualify for either Innocent Spouse or Separation of Liability Relief, but you did not know about an item that your spouse improperly reported on your joint return, you may be able to claim this status.  You can also be awarded this relief if the tax was reported correctly but not paid.

How to Qualify for Relief

 

To qualify for Innocent Spouse Relief, you must meet three criteria. First, you must have filed a joint return with your spouse that understated your taxes solely as a result of your spouse's erroneous item(s). An "erroneous item" would include income your spouse received but did not include on your joint return. Deductions, credits, and property basis are also considered erroneous items if they are incorrectly reported on the return.  

 

Second, you have to be able to show that you did not know, nor had reason to know, that there was an understatement of tax on the return when you signed it. Third, when everything is taken into account, you need to demonstrate that it would not be fair to hold you liable for the understatement of tax due to the actions of your spouse.

 

If you want to request Separation of Liability Relief, you must (1) have filed a joint tax return and (2) meet at least on of the following conditions:

  1. You are either divorced or legally separated from the spouse with whom you originally filed the return,

  2. You are widowed, or

  3. You have not shared a household with the spouse in question at any time during the 12-month period that ends on the date you requested relief.

To be eligible for Equitable Relief, you must show that it would be unfair for the IRS to hold you liable for either the underpayment or understatement of tax.

 

The Form 

 

To get relief, you should file an IRS Form 8857, Request for Innocent Spouse Relief.  Since tax relief like this can be complex, we would be happy to talk with you about your specific situations. We'll walk you through your option so you can make the most informed decision. 

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