Married couples who decide to jointly file a tax return can reap certain tax benefits in the form of tax breaks and credits. When you file jointly, however, you are jointly and severally liable for tax debts and any additions to it, such as interest or penalties, which may arise later from the joint return. Both spouses who file a joint tax return are liable for an equal amount of tax return, even if they divorce in the future or only one spouse earned all the income or claimed improper credits or deductions. What is important to note is that there are ways for a spouse to get relief from joint and several liability. Let’s see how.
Innocent Spouse Relief
A spouse can get relief from joint and several liability in three ways, and the first one is through innocent spouse relief. The provision enables qualified applicants to get exempted for any penalties, back taxes, and criminal prosecution they may have to bear due to their spouse’s fraud.
What Qualifies You for Innocent Spouse Relief?
There are several conditions you must meet to qualify for the innocent spouse relief, which include:
- Your spouse reported erroneous financial information on the tax return form, such as false or no income, incorrect credits, and deductions
- You must prove to the IRS that you had no information on your spouse’s fraudulent activities. If you had access to the bank information your joint bank account, the IRS may not consider you innocent
- You prove, with the help of facts and circumstances, that it would be unjust to hold you responsible for any understatement of tax
Note: The IRS doesn’t allow innocent spouse relief for your spouse’s loan or credit card obligations.
Separation of Liability Relief
This provision allows tax holders to equally divide any additional tax responsibilities. For instance, if your spouse inaccurately reported an item on the joint return, due to which you are required to bear additional tax, you can use the separation of liability relief to allocate this additional tax.
What Qualifies You for Separation of Liability Relief?
- You must be divorced from the spouse with whom you filed the joint tax return
- You are widowed, or
- You haven’t been living with your spouse with whom you filed the joint return for the past the 12 months
Equitable Relief
The Equitable Relief is the last opportunity that the IRS provides to innocent spouses to get relief from any taxes for which they should not be held liable. It is the final form of relief under the innocent spouse rule.
What Qualifies You for Equitable Relief?
- You failed to qualify for either the innocent spouse relief or separation of liability relief
- You must not have filed the tax return with the intent of committing fraud
- Your spouse/ex-spouse did not transfer any property to avoid their tax liabilities
Takeaway
The innocent spouse relief and separation of liability relief are provisions that can help innocent spouses to get relief from penalties or additional tax, which they may be liable for due to their spouse’s illegal activities. If you don’t’ qualify for these provisions, you can apply for the equitable relief, for which you must prove that in light of all facts and circumstances the IRS should not hold you guilty of any tax frauds. Nick Nemeth can provide you with detailed information on how to navigate in seeking spousal relief and help get a favorable determination. Call us at (972) 426-2553 or fill out our contact form to schedule a free no-obligation appointment.
