innocent spouse relief can resolve tax debt problems.
What Is Innocent Spouse Relief?
Who Is Eligible?
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 For Innocent Spouse Relief
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).
Reason To Know
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?
Partial Relief
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
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
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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