By claiming innocent spouse relief, you can be relieved of liability for taxes, interest and penalties if your spouse (or ex-spouse) improperly reported items or omitted items on your tax return.
Generally, only your spouse (or ex-spouse) can recover the tax, interest, and penalties that qualify for the exemption. However, you are jointly and severally liable for any taxes, interest and penalties that are not covered by the exemption.
What Is Innocent Spouse Relief?
This applies to situations where one spouse has not received the income from which the liability arises and after the divorce, even if the spouse agreed to be responsible for paying the tax during the divorce settlement.
However, the IRS has provided defence options through the innocent spouse provision of the Internal Revenue Code.
This is especially important in situations where only one spouse is a viable source of collection. It can also be a situation where adverse collection actions threaten the former spouse’s acceptable standard of living.Â
In order to file an innocent spouse claim, taxpayers must file Form 8857. This requires detailed answers to a series of questions about the spousal relationship and liability at issue.
ALSO CHECK: What Is Net Change? Detailed Overview, Formula Calculation
How Does Innocent Spouse Relief Work?
There are situations where the fraud was done knowingly and the wife who was kept in the dark is forced to try to explain to the authorities when they really have no idea what just happened.
It can be a very painful and humiliating experience to know that your spouse has cheated on you and you are expected to clean up. This may also mean that you will be on the hook for their obligations.
Fortunately, the IRS has a provision known as innocent spouse relief. If you meet certain criteria, you will be exempt from any atrocities committed by your husband.
It’s a great relief to know that at least some of the destruction will be lifted off your shoulders. We have helped other bereaved spouses and we can help you.
ALSO CHECK: CASHBACK LOANS: Company Profile & Funding
Innocent Spouse Relief Example
In the event of a divorce (or death), both spouses remain responsible for paying taxes for that year, even if (in the event of a divorce) the decree states otherwise. Some lawyers do not understand that family court decisions do not supersede the IRS tax code.
You can claim innocent spouse relief from tax liability, including applicable penalties and interest, if you believe your ex-spouse has put you in an unfair position and should be responsible for all or most of the money owed.
The first step you need to take is to carefully complete and submit Form 8857. The IRS will use it to determine whether one of the three types of innocent spousal relief is warranted in your circumstances. If more information is needed, the IRS will contact you.
ALSO CHECK: UNLIMITED LIABILITY: Meaning, Examples & What You Need
How Does Innocent Spouse Relief Tax Work?
Because of certain advantages of filing jointly, many married taxpayers choose to file jointly. However, filing a joint return carries an additional burden as both parties are responsible for paying the tax.
Also, under the IRS code, married taxpayers filing jointly are responsible for any additional tax, penalties or interest associated with the account.
This is a concept in law known as joint and several liability, meaning that the spouses are liable for any tax liabilities together (jointly) but may be liable for them as individuals (separately).
ALSO CHECK: What is Residual Income? Best Practices & What You Need
How Does Innocent Spouse Relief IRS Work?
As a practical matter, the IRS does not have the resources to independently determine who is an innocent spouse.
This would require the IRS to review thousands and thousands of joint collection accounts. They will make individual decisions about who should be assessed the increased liability.
The IRS will calculate the amount of tax you paid after you file Form 8857. You do not have to determine this amount. But if you wish, you can figure it out yourself. See Post 971 for how to apportion underpayment tax.
ALSO CHECK: Billing Statements: Templates & All You Need
What Are The Types Of Innocent Spouse Relief?
Original Spouse Relief
Original spousal relief is the first and most basic form of relief. In order to qualify, you must file a joint tax return with your spouse on which your spouse made serious mistakes or committed fraud.
You should not have known about the fraud and you should be able to prove that you did not know and could not have known.
Equitable Relief
If you are not eligible for either of the other two forms of innocent spousal relief, the IRS will review your eligibility for injunctive relief. This is the only type of relief for the innocent spouse that allows you to get relief from underpayment or underpayment of tax.
You may be eligible for legal protection in situations where you have been the victim of abuse. This includes where you were unaware of your spouse’s fraudulent activities. It also include where circumstances have deprived you of your ability to pay tax.
Separate Liability Election
This type of settlement divides the amount owed between you and your ex-spouse. To qualify, you must file a joint tax return with a spouse to whom you are no longer married or from whom you are separated.
Additionally, you may qualify for the separate liability election if you were not a member of the same family when you filed your joint tax return.
How To Qualify For Innocent Spouse Relief
Each program has different qualifications to receive aid. If you are entitled to relief, your name will remove all or part of the joint and several liabilities.
If your liability is discharged in full, you will no longer be liable or responsible for the unpaid tax liability. It is important to note that helping the innocent spouse is not the same as helping the victimized spouse.
You may be eligible for relief under the spousal survivor provisions if you filed a joint tax return and all or part of your overpayment was applied or offset against backlogged federal tax, state income tax, child support, or spousal support or federal nontaxable debt, such as a student loan.
To be eligible for Innocent Spouse Relief, you must meet all of the conditions below. First, you must file a joint return with an understatement of the tax shortfall. This flaw can be directly applied to your husband’s mistake.
This includes income your spouse earned but didn’t report, as well as improperly reported deductions, credits, and capital gains. Next, you must be able to prove that when you signed the tax returns, you were unaware of the errors and had no reason to know about them.
Finally, to qualify, you must prove that, based on your circumstances and all the facts involved, it would be unfair to hold you liable.
How To Apply For Innocent Spouse Relief
If you think you may qualify for innocent spouse relief, you can apply by filing Form 8857 with the IRS. You don’t need to pay a fee to apply for help, but you may need to pay a professional to help you complete the form.
If you want to claim innocent spouse relief, you must file Form 8857. You must do this within two years of the date the IRS first started trying to collect tax from you. For example, if the IRS sent you a notice of deficiency on September 1, 2018, you would have to file Form 8857 by August 31, 2020.
If you’re requesting exemption from liability for interest and penalties, you must file Form 8857 within 10 years of the date the IRS first began trying to collect tax.Â
After you file Form 8857, the IRS will review your request and make a decision. If he approves your request, you will no longer be responsible for the applicable taxes. If the IRS denies your request, you can appeal the decision.
CONCLUSION
The Innocent Spouse Relief is for people who file a joint tax return (married people filing a joint tax return). If there is no income on your tax return, it should be your spouse’s income, not yours. Be able to show that when you signed the tax return, you did not know and had no reason to know that you were underestimating your tax liability.
The IRS looks at everything from the nature of the mistake to your financial situation and your education. They study how involved you were in the activity that created the problem, whether the problem is part of a pattern, and other factors.Â
The IRS also considers fairness when determining whether to award relief to the innocent spouse. It looks at everything from whether you benefited from a tax mistake, to your marital status and even whether your spouse left you.
Innocent Spouse Relief FAQs
Will Your Spouse Be Contacted When You File For Innocent Spouse Relief?
In every case of innocent spouse relief, the IRS must contact your spouse about your claim, even if you were a victim of spousal or domestic violence. The law provides that both spouses participate in the process
How Do You Know You Are Eligible For Innocent Spouse Relief?
A married couple filing a joint tax return must be filed, and they must not have actual knowledge or reason to know of the understatement of income or overstatement of deductions. In addition, they could not benefit from the tax savings. Generally, this is the case where the spouses are either currently separated or living separately. But the tax return in question must have been filed as a married joint return at the time of filing for Innocent Spouse Relief.
What Is The Implication Of Filing Joint Income Tax Returns?
Most couples file joint income tax returns. Filing jointly means that both spouses are responsible for any taxes, interest and penalties. This includes those resulting from errors or willful failure to comply with tax requirements. If the IRS determines within three years that the taxes were filed incorrectly, the IRS can pursue both spouses in an attempt to collect the debt.
