innocent spouse relief can resolve tax debt problems.
Your financial situation is different from someone else. The tax debt relief service that works for someone may not be the best choice for someone else. You should take the time to understand all the debt relief options available to you to find the best solution for your needs and goals.
What Is Innocent Spouse Relief?
The IRS provide a special form of tax debt relief status called innocent spouse relief. It is intended for those that are widowed, divorced or separated and are experiencing tax problems that arose out of the actions of a former spouse. This debt relief status could result in the IRS writing off your entire tax bill against you.
Who Is Eligible?
When both spouses are married and filing jointly, both taxpayers are legally responsible for the entire liability for the tax, and any additions to tax, interest, or penalties that arise from the joint return. This applies even if one spouse earned all the income or claimed improper deductions or credits. This is also true even if a divorce decree states that a former spouse will be responsible for any amounts due on previously filed joint returns.
The IRS allows you to seek relief from undue taxes resulting from the actions of a current or former spouse. These actions by your spouse may be due to improperly reported or omitted items on a joint tax return. The IRS will consider all facts and circumstances in determining whether you had reason to know of an understatement of tax due to an erroneous item.
Eligibility | Reason To Know
eligibility for innocent spouse relief status
You must meet all of the following conditions to qualify for innocent spouse relief.
- You filed a joint return which has an understatement of tax due to erroneous items, of your spouse (or former spouse).
- You establish that at the time you signed the joint return you did not know, and had no reason to know, that there was an understatement of tax.
- Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax.
- ou and your spouse (or former spouse) have not transferred property to one another as part of a fraudulent scheme.
The IRS considers erroneous items to be:
- Unreported income. This is any gross income item received by your spouse (or former spouse) that is not reported.
- Incorrect deduction, credit, or basis. This is any improper deduction, credit, or property basis claimed by your spouse (or former spouse).
Actual knowledge or reason to know
If you actually knew about an erroneous item that belongs to your spouse (or former spouse), Innocent Spouse Relief does not apply to any part of the understatement of tax due to that item. You and your spouse (or former spouse) remain jointly liable for that part of the understatement.
If you had reason to know about an erroneous item that belongs to your spouse (or former spouse), Innocent Spouse Relief does not apply to any part of the understatement of tax due to that item. You and your spouse (or former spouse) remain jointly liable for that part of the understatement.
The IRS will consider all the facts and circumstances in determining whether you had a reason to know. These would include:
- The nature of the erroneous item and the amount of the erroneous item relative to other items.
- The financial situation of you and your spouse (or former spouse).
- Your educational background and business experience.
- The extent of your participation in the activity that resulted in the erroneous item.
- Whether you failed to ask, at or before the time the return was signed, about items on the return or omitted from the return that a reasonable person would question.
- Whether the erroneous item represented a departure from a recurring pattern reflected in prior years’ returns.
What Else Should I Know?
Innocent spouse relief only applies to individual income or self-employment taxes. For example, Household Employment taxes, Individual Shared Responsibility payments, and business taxes and trust fund recovery penalty for employment taxes are not eligible for innocent spouse relief.
Partial Relief | Unfairness
Partial Relief
You may qualify for partial relief if, at the time you filed your return, you had no knowledge or reason to know of only a portion of an erroneous item. You will be relieved of the understatement due to that portion of the item if all other requirements are met for that portion.
Here is an example of partial Innocent Spouse Relief:
- You knew that your spouse did not report $5,000 of gambling winnings when you filed your return.
- The IRS later determines that it was $25,000 of gambling winnings.
- You established to the IRS that you did not know about, and had no reason to know about, the additional $20,000 because of the way your spouse handled gambling winnings.
- The understatement of tax due to the $20,000 will qualify for innocent spouse relief.
- The understatement of tax due to the $5,000 will NOT qualify for innocent spouse relief.
Unfairness for Innocent Spouse relief
The IRS will consider all of the facts and circumstances of the case in order to determine whether it is unfair to hold you responsible for the understatement of taxes.
The following are examples of factors the IRS will consider.
- Whether you received a significant benefit, either directly or indirectly, from the understatement.
- Whether your spouse (or former spouse) deserted you.
- Whether you and your spouse have been separated or divorced.
- Whether you received a benefit on the return from the understatement.
Thoughts On Innocent Spouse Relief
You have the burden of proof to show to the IRS that your spouse (or ex-spouse) acted without your knowledge or consent. The IRS will inform your spouse/ex-spouse of your relief status claim. If you have a happy marriage, ponder your decision.
Applying for IRS Innocent Spouse Relief can be a challenging task. It is strongly recommended that you have professional advice and representation when dealing with the IRS.
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