Most married couples in the United States file a joint tax return each year due to convenience, reduced tax preparation fees, and most importantly, a reduced tax rate provided by the government. For most married couples filing jointly is not an issue. But, what happens if you had no idea that your spouse was not reporting all of his or her income? What if you are no longer living together? What about if you divorce? All of these situations present challenges. Then, what if the IRS institutes collection actions against you and your former spouse? Are you liable for back taxes, interest and penalties on income or other errors on your joint tax return that you didn’t know about?
If your income tax filing status is “married filing jointly” both you, and your spouse, are liable for any taxes owed.1
However, in certain circumstances, the IRS can impose Innocent Spouse Relief. According to the IRS, Innocent Spouse Relief provides relief from additional tax you owe if your spouse or former spouse failed to report income, reported income improperly or claimed improper deductions or credits.2 There are three IRS conditions on who may file for Innocent Spouse Relief and you must meet ALL of these conditions to qualify.
First, you have to have filed a joint return in which the understatement of tax is “solely attributable to your spouse’s erroneous item.”3 The IRS defines an understatement of tax as when the IRS determines that your total tax should be more than the amount that you actually show on your tax return. The IRS defines an erroneous item as income received by your spouse but not included on the joint return. An erroneous item can also include deductions, credits and property basis (the original cost of property adjusted for factors such as depreciation) if they were incorrectly reported on your joint return.
Second, you need to establish that at the time you signed the joint tax return you weren’t aware, and had no reason to suspect, that there was an understatement of tax.
Third, if given all the facts and circumstances of the understatement of tax, it would be unfair to hold you liable for the understatement of tax.
It is important to note that the spouse who is not seeking the relief will be notified by the IRS that relief is being sought so that the non-requesting spouse can provide information for consideration regarding the claim. There are no exceptions, even for victims of spousal abuse or domestic violence.4
The IRS will not provide the non-requesting spouse with any contact information such as your current address or telephone number, but the IRS will provide the non-requesting spouse with all other information that you provided to the IRS. That is why the IRS asks taxpayers in these situations to carefully review the information being submitted and redact, or black out, any information that you would not wish the non-requesting spouse to see. Another thing to consider before filing for Innocent Spouse Relief is that in doing so the IRS can audit the entire tax return and may actually find you owe additional taxes.5
In order to obtain Innocent Spouse Relief, the spouse who is requesting the relief can do one of two things. They can complete IRS Form 8857, Request for Innocent Spouse Relief, or they can file a written statement containing the same information as on the IRS Form 8857. IRS Publication 971, Innocent Spouse Relief,6 contains more information. The IRS also offers a list of answers to commonly asked questions about Innocent Spouse Relief.7
If you are experiencing serious tax debt or tax dispute due to your spouse’s filing error, an experienced and knowledgeable Tax Attorney can help. The Law Offices of Peter C. Rageas has been practicing Tax Law Resolution for over 20 years. Our law firm is extremely knowledgeable in the local, state, and federal tax code, as well as vastly experienced in all matters relating to tax resolution, tax dispute, and general issues relating to IRS tax and debt relief. Contact us today and let’s begin rebuilding your financial future!
1, 2, 3, U.S. Internal Revenue Service, Topic Number 205 – Innocent Spouse Relief
5 Everything You Need to Know About Innocent Spouse Relief, by Andrew Latham, 8/27/2018
4, 6 U.S. Internal Revenue Service, Publication 971 – Innocent Spouse Relief
7 U.S. Internal Revenue Service, Innocent Spouse Questions and Answers