In a marriage, sometimes one partner makes more decisions than the other. One might be in charge of the finances while the other runs the household. In these situations, sometimes one member doesn’t really have an idea what the financial situation is and may incur a tax liability with their spouse without actually knowing they have that liability. That’s why the IRS created Innocent Spouse Relief, as it wanted to allow a spouse to be able to seek relief from tax penalties resulting from unpaid tax balances. While innocent spouse can give you partial or full relief from the tax liability, it can be very difficult to get the relief- as proving you didn’t know about the tax balances can be tricky. If you think Innocent Spouse Relief is right for you, here is what you need to know.
Innocent Spouse Relief
Innocent spouse relief is a provision in the U.S. tax code to help spouses who weren’t able to know or were lied to by their partners about their financial situation. When you are married, you have the choice to file jointly or separate from your spouse. When you file jointly, you both file and sign the same tax return. This means you both are responsible for the taxes owed. Even if you get divorced, you both are equally responsible for the taxes owed. The IRS acknowledges that there are situations where a spouse may not know their true financial situation due to the other keeping it secret or lying. By requesting innocent spouse relief, you can be relieved of having the responsibility of paying the taxes, the interest and penalties due to your spouse improperly reporting or claiming income or tax deductions. The IRS can grant you partial relief for the taxes you owe or can relieve you of the full tax liability. It depends on the circumstances.
How Do I Qualify?
To apply for innocent spouse relief, you will need to fill out Form 8857 Request for Innocent Spouse Relief. To qualify for innocent spouse relief, you will need to meet the following conditions.
- You will need to have filed a joint return which has an understatement of tax due to erroneous items
- You will need to establish that at the time you signed the return that you did not know or had no reason to know that there was an understatement of tax. This can be the hardest to prove as you have to prove to the IRS that you didn’t know that there were errors on the tax return but you also have to prove that a reasonable person in similar circumstances wouldn’t have known that there were errors on the return
- The IRS will need to see that due to the facts and the circumstances that it would be unfair to hold you liable for the understatement of taxes
- You and your spouse have not transferred property to one another as part of a fraudulent scheme
You may qualify for partial relief if at the time you filed the tax return, you had no knowledge or no reason to know of only a portion of the taxes owed.
When looking at the fairness of holding you accountable for the taxes owed, there are several factors the IRS will look at. It will look at if you received a significant benefit, either directly or indirectly, from the understated taxes. A significant benefit is any benefit in excess of normal support you would receive. The IRS will also look at if your spouse or former spouse deserted you, or if you two are divorced or separated.
If you think innocent spouse is something that might be beneficial to you, it’s best to consult with a tax professional. A tax attorney will be able to look at your finances and tell you if you have a chance. It’s important to get help if you want to apply for Innocent spouse relief as a tax attorney can help you prove that you were If you need tax attorneys to help to settle your tax liability, give us a call at 844-841-9857 or click below to schedule a free consultation.
