Many married taxpayers file a joint tax return to qualify for the tax benefits attached to it. When filing jointly, both spouses are equally liable for all taxes, interests, and penalties that arise from the joint return, even if the couple gets divorced or only one spouse earned all the income or claimed deductions. There can be, however, a case wherein one spouse is innocent of the other’s tax debts, which is why the IRS has innocent spouse tax relief in place to help the innocent spouse get relief from tax debts. Read on to learn more about innocent spouse tax relief and whether you qualify for it.
IRS Innocent Spouse Tax Relief Requirements and Qualifications
Under the Innocent Spouse Tax relief program, a spouse can file for tax relief from the tax liability of the other spouse only if they fulfill the stipulated eligibility criteria. That said, married couples who have jointly filed a tax return can apply for Innocent Spouse Relief, even if they have separated. If you are planning to file for Innocent Tax Relief, you must meet the following qualification criteria.
- 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 of 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.
Injured Spouse vs Innocent Spouse Relief
As per the IRS, taxpayers can claim injured spouse relief if they want to reclaim their share of the refund applied to their spouse’s taxes. This may have been applied to overdue debts such as debts to federal agencies, past-due child support, state unemployment compensation debts, or state income tax obligations. The IRS typically notifies taxpayers when reducing their federal tax refund through a Notice of Offset. Taxpayers who want to apply for injured spouse tax relief can submit Form 8379 to the IRS service center where they filed their original return. Generally, the wait time for injured spouse relief is up to 8 weeks or longer (if filed with the tax return), but taxpayers can check their injured spouse relief and refund status by contacting the Bureau of the Fiscal Service’s Treasury Offset Program (TOP) call center.
Innocent spouse relief can be filed by taxpayers who want relief from paying additional taxes in lieu of something wrongly filed in the joint tax return without your knowledge.
How To Request IRS Innocent Spouse Tax Relief?
If you believe you fulfill one of the mentioned criteria for filing the Innocent Spouse Tax Relief, you should submit to the IRS the Innocent Spouse Tax Relief Form 8857, or a written statement containing the same information as required in Form 8857, which is signed under penalties of perjury. For more information on how to fill out an IRS innocent spouse tax relief form, you can refer to publication 971. You can also consult a tax attorney, and they can take care of filling out the innocent spouse relief form, given that they are well-informed about the IRS Innocent Spouse Tax Relief rules. They can also reduce the chances of innocent spouse relief denial. Once you file the request for relief from joint liabilities, the IRS will notify your spouse of your request and allow him or her to provide justifications regarding your claims.
Separation of Liability Relief and Equitable Relief
When you file jointly, you are jointly and severally liable for tax debts and any additions to them, such as interest or penalties, that 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 an innocent spouse to get relief from joint and several liability.
Qualification for 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 12 months.
Qualification for Equitable Relief
Equitable Relief is the last opportunity that the IRS provides 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 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.
Busting 5 Common Myths About IRS Innocent Spouse Tax Relief
Although innocent spouse tax relief has many benefits, there are many misconceptions associated with it. If you are planning to file innocent spouse tax relief but need a better understanding, speak with the IRS attorneys at the Law Offices of Nick Nemeth. Continuing the discussion, in this blog post, we bust five myths about the IRS Innocent Spouse tax relief. Read on.
Myth 1: Innocent Spouse Tax Relief is a lengthy procedure
Fact: The duration of the Innocent Spouse tax relief process is about 5 to 6 months, after which a final determination is made. During the processing time, the IRS asks for your tax information and contacts the non-requesting spouse.
Myth 2: Taxpayers should wait to file Innocent Spouse Relief
Fact: Taxpayers need not wait to file their innocent spouse tax relief. You can file your current return and the IRS will not hold any refund that is due.
Myth 3: Both spouses cannot request relief
Fact: According to the IRS, each spouse has the right to file a Form 8857 to request innocent spouse tax relief from a number of liabilities, such as tax, interest, and penalties.
Myth 4: Relief can be filed in cases of Tax Understatement
Fact: You may find many situations in which you owe tax that is actually owed by your spouse. You and your spouse, for instance, file a joint return that reports $10,000 of income, but you knew that your spouse was not reporting $5,000 of dividends. In such a case, you will not be eligible for innocent spouse relief if you were aware about the understatement.
Myth 5: Spouses can reapply for relief after being denied by the IRS
Fact: Spouses cannot re-apply for relief after being denied by the IRS. The only time you can re-apply for relief is if the relief was denied because you were still considered married at the time the request for relief was filed, and you now want to separate the liability.
Wrap Up
During the last few years, the IRS has relaxed many of the qualifying factors for innocent spouses, such as adding a 2-year grace time for the Tax Relief (after the initiation of collection actions). Though the procedure for applying for IRS Innocent Spouse Tax relief is now easier, the taxpayer must be aware of the qualifying criteria for a successful resolution. If you are planning to file for Innocent Spouse Tax Relief, feel free to get in touch with The Law Offices of Nick Nemeth. We can help determine your eligibility for the relief and the way forward, if you do. You can reach us at (972) 426-2991, or fill out our contact form, and we will get back to you.
