Do you know why most married taxpayers go for filing joint tax returns? It’s actually because of the benefits that it offers. But with joint tax returns, both the filers hold the responsibility for the tax bill or any penalties and interest that arise from it. Both are legally responsible for the entire liability, even if one spouse doesn’t report income or reports it incorrectly. But in case your spouse or former spouse has made any errors while filing for tax, you thankfully have a way to not be penalized by having to pay additional taxes. Read through the next few lines to know exactly how and save yourself from extra tax penalties.
Innocent Spouse Relief-What is it, and Do I Qualify For it?
Innocent spouse relief helps provide relief from any cases or situations where your spouse or former spouse has incorrectly reported their income or claimed improper deductions or credits from it. It has a criterion or set of qualifications to be met for the IRS to consider your request. Remember, be very sure when applying because the IRS can deny your request or, in some cases, take up to 6 months to process your application causing unnecessary stress.
The eligibility criteria that you need to meet to apply for innocent spouse relief is simple and consists of the following five points:
- You and your spouse/ former spouse must have filed for joint taxes.
- The error made should be such that it can be attributed to one of the two people only.
- You must have proof that you did not know that there was an improper step being taken when you signed the document.
- Make sure that if you request relief, it is apparent that, once all the circumstances are considered, it would be unfair to hold you responsible for what happened.
- The problem should be reported within two years of IRS demanding the tax from you. But there may be a few exceptions to this case, so ask a professional for help and a better understanding of your case.
Keep in mind that the Internal Revenue Service will observe and take notes of everything, including your financial and educational background and the nature of the filing error, amongst other factors. It is thus advisable that you seek the help of a professional who is skilled in tax provisioning and has experience related to innocent spouse relief.
What Happens if I Don’t Qualify for Innocent Spouse Relief?
For taxpayers who fail to qualify for the innocent spouse relief, there are two options;
- Separation of liability relief
If you haven’t lived with the other person for over 12 months before making the request, you can be eligible for this. To qualify, you must either be a widow, divorced, or living separately. In such cases, the Internal Revenue Service allows you and the other person to pay the bill separately, dividing it into sections so that each person is responsible for paying their section only.
- Equitable relief
To be eligible for this relief, you must establish that it would be unfair to hold you liable for the deficiency or underpayment of the taxes under any circumstances. This can also be an option for a taxpayer who didn’t file for joint tax returns but lives in a state where income is considered shared.
Help- How Do I File for Innocent Spouse Relief?
There can be two ways to go about this. You can either submit the IRS form 8857 (which will be complicated and lengthy, so it is better to consult someone with more knowledge of the business here) or submit a handwritten statement detailing all the information. The IRS will then determine the tax you are responsible for paying. There are a few things to keep in mind, though:
- The IRS will inform the other person about the claim you made, and they will be allowed to provide any information in favor or against it to benefit the case.
- The penalty has to be paid by the other person entirely in case you are exempted from it.
- If, in case, you paid the bill before filing for the innocent spouse relief, the IRS will only refund the amount that you paid from your own money.
- Some taxes don’t qualify for the relief. For these cases, you will both be liable to pay your share of the tax.
A Lack of Knowledge Can Cost You
The most problematic yet common problem occurs when a taxpayer files for relief because they are unaware of the error in the file. It may be proved that they did not know, but sometimes, the court states that they should have known nonetheless. Also, some court rulings expect the taxpayer to properly review each section of the tax return and rightly so, it is important to investigate any suspicious accounts or parts properly.
Thus, it is important to remember that the lack of knowledge rule holds a taxpayer responsible for not knowing the error beforehand or not reviewing their application before filing for tax returns. So they are expected to pay the tax or penalty imposed on them by the Internal Revenue System if there isn’t enough proof to get them exempted.
With so many complicated rules and sections of the law that need to be kept in mind while filing for tax returns or even applying to get relief, it is best to get in touch with a tax specialist and let them handle your matters. It will not only save you time and money, but you will also be able to benefit from their expertise as they make sure you have a smooth experience. To make your life easier and stress-free, contact us today and get a skilled tax specialist on your team as you get ready to face the IRS!