Innocent Spouse Tax Relief

It is very common for married individuals to file joint tax returns for the purpose of decreasing their tax liability. When the joint tax return is filed, both individuals are held liable for any taxes, penalties and interest owed to the IRS. Even when individuals get divorced and the divorce decree states that one individual is 100% responsible for the tax liability owed, the IRS still has the right to go after both individuals to collect. This is where innocent spouse relief comes into play. The IRS created innocent spouse relief for the purpose of transferring the responsibility of the liability to one individual.

The IRS created 3 different forms of innocent spouse relief. If you do not qualify for one type, it is still possible that you may qualify for the other types of relief. If you do qualify for one of these forms of relief, it is likely you will be able to be relieved of taxes, interest, and penalties owed to the IRS and those liabilities will be transferred to the other spouse. Below are the three types of relief and their requirements.

Innocent Spouse Relief (Original)

This is the original type of innocent spouse relief before the two other forms were added, which is why it is called innocent spouse relief, but don’t be confused that this is the only form of innocent spouse relief. The IRS states 3 criteria in order to qualify for this type of relief and you must meet all of them to be able to qualify. Below are the 3 criteria:

1. You must have filed a joint tax return with the person you are requesting relief from. The filed return must have had an understatement of tax. This understatement of tax must be from errors that your spouse or former spouse made.
2. At the time you filed and signed the joint return, you did not know, or you didn’t have any reason to know, that there was an understatement of tax liability.
3. Based on your situation, it would be unfair for the IRS to hold you responsible for the taxes owed. Some things the IRS tax into consideration for this is if you received any benefit from the understatement of tax, if you were abandoned by your spouse or if you are legally separated or divorced.

Relief By Separation of Liability

Under this form of innocent spouse relief, the IRS will separate the understatement of tax between you and your spouse or former spouse. The amount will be allocated based on the amount each individual should be responsible for. Below are the requirements for separation of liability:

1. You filed a joint return and you have unpaid liabilities that are from an understatement of tax.
2. You must be legally divorced or separated from your former spouse with whom the joint return was filed with.
3. You are not living with nor considered to be part of the same household with your former spouse.

Equitable Relief

With this form of relief, individuals can receive relief for an understatement of tax or an underpayment of tax. This was the last method to be added to the innocent spouse rule because it was realized that there are some cases where it would be unfair to hold an individual liable for the tax amount owed and they didn’t qualify for the original form of innocent spouse relief or separation of liability. Below are the requirements to qualify for this type of relief.

1. You didn’t meet the qualifications for innocent spouse relief or separation of liability.
2. When you filed your tax return you didn’t realize there were errors and didn’t file the return with the intent to commit fraud.
3. You didn’t pay the tax amount that is owed.
4. You didn’t transfer any assets between you and your spouse/former spouse for the purpose of trying to avoid paying the taxes owed.
5. You must be able to prove to the IRS that it would be unfair to make you pay for the tax liability.
6. The tax problem that was created, was the fault of your spouse.

Filing for Innocent Spouse Relief

In order to file for innocent spouse relief you must file form 8857 with the IRS. It is also highly suggested that you include a letter that explains your situation in more detail while stressing reasons why you qualify. Innocent spouse relief is a difficult type of relief to receive from the IRS and it is highly suggested that you use a tax professional and innocent spouse relief help. Your chances of getting your filing accepted will significantly increase when using a professional when filing for this type of relief.