If love means never having to say you’re sorry, it should also mean never having to pay for their tax errors, too, right? At first glance, the answer would be “no” since you and your spouse may have filed your return jointly.
As joint tax filers, you and your spouse are legally and jointly responsible for that return, including accurate reporting of all income, assets, deductions, taxes owed and penalties. It seems only fair after all.
In some cases, however, you can file for what is known as Innocent Spouse Relief, which can free you from the liability of your spouse’s tax missteps. There are current three forms of Innocent Spouse Relief.
Innocent Spouse Relief
This program relieves you of any additional tax you may owe if you spouse or former spouse failed to report income, claimed improper deductions/credits, or improperly reported their income. The IRS refers to these errors as “erroneous items.”
The IRS has established three criteria for eligibility, and you must meet all of them.
- You verify at the time of signing the joint tax return that you weren’t aware of, or had reason to be aware of any understatement of tax owed.
- You and your spouse filed a joint return that understates the tax owed. It must be only attributable to your spouse or former spouse’s “erroneous item.” One example would be income received but not reported on the return. Deductions, credits and property are also considered erroneous items if they are incorrectly reported on your joint return.
- Taking all things into consideration, it would be unfair to you to hold you liable for the underreporting or understatement of tax owed.
This form of relief may help if your don’t qualify for Innocent Spouse Relief or Separation of Liability Relief. This program applies to items improperly reported and which can be only tied to your spouse. Equitable Relief may also apply to taxes that were owed but not paid at the time of filing.
In order to be eligible for Equitable Relief, you must be able to establish that under all circumstances, it would be unfair to hold you liable for the improper item on the joint return.
In addition, you must meet the criteria as stated in IRS publication 971.
If you were a victim of financial control or abuse by a spouse, you or your tax pro can refer to IRS Procedure 2013-34 for information on how to proceed in light of financial or domestic abuse.
Separation of Liability Relief
Provides separation of tax owed by you and your former spouse. Separation of Liability Relief may also apply to your current spouse if you are legally separated and not living with them. You are then only responsible for your share of the taxes.
You must meet one of the criteria below in order to qualify:
- You are divorced or legally separated from the spouse with whom you filed the joint return
- You are widowed
- You haven’t lived with your spouse at any time during the 12-month period ending on the date of your Innocent Spouse Relief request.
However, if you knew of the incorrect item on the return at the time you signed the return, you are not eligible for this form of relief.
Which Forms To File
If you’ve been a taxpayer for any length of time, you know the IRS has a full menu of publications and forms. Innocent Spouse Relief is no exception.
You or your tax pro must complete and submit form 8857, Request For Innocent Spouse Relief. As an alternative to form 8857, you can submit a written statement verifying the same information as requested on form 8857. Sign the letter under penalty of perjury (in other words, don’t’ lie in the letter).
If you request either of the three forms of Innocent Spouse Relief, the IRS is required to notify the spouse with whom you filed jointly. In turn, they will have the opportunity to present information that could substantiate or challenge your request.
Community Property States
If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin, you may be eligible for relief even if you didn’t file jointly.
Marital problems are tough enough to deal with. If your spouse’s tax issues are also in the mix and you don’t know how to proceed, contact us. Our team of experts will assist you every step of the way.