Innocent Spout Relief Information
A married couple filing a joint return can have many benefits. In fact, Congress encourages married couples to file jointly by offering reduced tax rates. But Congress’ ostensible benevolence has an underlying motive. This is where innocent spouse relief comes in.
According to Internal Revenue Code 6013, married individuals who file joint income tax returns are jointly and severally liable for the tax due for the taxable year in which the joint return was filed. By filing jointly, Congress can go after both individuals who signed the tax return because both spouses are on the hook for the tax due for the year the return was signed. Congress expanded collection rights in exchange for a modest tax break.
The tax joint liability rule can cause unfair results. For example, what occurs when two married people file a joint return together and end up getting a divorce, and one in the relationship doesn’t report all of their income? The Internal Revenue Code permits the IRS to go after the innocent spouse. What happens if the innocent spouse knows nothing about the unreported income? That individual could be facing back taxes plus penalties and interest. They could face wage garnishment or stiffer penalties if they signed the joint tax return.
Fortunately, Congress recognized it could be inequitable to impose joint and several liabilities on a spouse who lacks knowledge of the entries on the joint return, causing the understatement added the innocent spouse provisions to the Tax Code.
What Does it do?
The IRS knows an “innocent spouse” may be helplessly embroiled in their spouse’s tax issues. If one of the spouses who signs the joint tax return does not believe he or she should be liable for the full amount of the taxes, that spouse may seek relief from liability under the innocent spouse rules. To prevail under the IRC 6015(b), you must prove the following:
- You must have filed a joint tax return with an understatement of tax.
- The understatement of tax must be due to erroneous items of your spouse.
- You must establish that when you signed the joint return, you did not know, and had no reason to know, that there was an understatement of tax.
- You must file the election within two years after the IRS begins a collection action against you.
- Considering all of the facts and circumstances, it would be unfair to hold you liable for understating tax.
Suppose you cannot obtain relief under 6015(b). In that case, you may get “separate liability” relief under IRC 6015(c), available to spouses who become divorced or legally separated after filing a joint return. You have the right to terminate your joint filing status and separate yourself from your spouse’s unpaid tax debt, and you do not need consent to make the election. To qualify under IRC 6015(c), you must prove the following:
- When making the election, you must be divorced or legally separated.
- You must not have been living with your spouse during the one year preceding the date you file the election.
- You must distinguish your tax obligation from your spouse’s to prove a separate liability.
It would be best if you Acted Fast
To qualify, you must act urgently and file Form 8857, Innocent Spouse Relief Request, within two years of the date on which the IRS first began collection activity (IRC 6015 (b)(1)(E)).
Equitable Relief
When relief is not available under the innocent spouse procedures (IRC Sec. 6015(b)) or separation of liability procedures, you may be able to qualify under IRC 6015(f). IRC 6015(f) authorizes the IRS to grant equitable relief if, considering the facts and circumstances, it would be inequitable to hold a requesting spouse liable for any unpaid tax or deficiency.
How A Tax Attorney Can Help
Innocent Spouse Relief is factually driven, especially when applying for equitable relief. The Internal Revenue Manual and case law addressing issues affecting entitlement to relief are continuously changing. Therefore, research is necessary to be aware of new developments that are beneficial for troubled taxpayers. A tax attorney, such as Todd Unger, can fully develop the facts surrounding the claim of a spouse seeking innocent spouse relief and apply the facts to the most relevant and up-to-date case law. This can greatly improve your chances of qualifying for innocent spouse, separation of liability relief, or equitable relief.
Contact us today for a confidential consultation, by calling (877) 544-4743.