What is Innocent Spouse Tax Relief?
Under Federal tax law, when you file a joint tax return, both spouses are responsible for all the taxes owed on your return statement. However, under certain conditions, a special measure built into Federal tax laws allows for a spouse to be free of any legal responsibility to pay the taxes, interests and penalties incurred by the other spouse. This release from tax liability is known as the Innocent Spouse Tax Relief.
How can I qualify for Innocent Spouse Tax Relief
In order to qualify as an Innocent Spouse, all the following conditions must be fulfilled:
>> The joint return has an understatement of tax due to erroneous items. Erroneous items include any unreported income by your spouse or false deductions or tax credits claimed by your spouse.
>> As the innocent spouse, you can prove conclusively, without doubt, that during the time of signing the joint tax return, you had no actual knowledge or reason to know about the tax understatements in the return.
>> The IRS concludes that under the given conditions and circumstances, it would be unfair to hold you liable for the tax understatements.
What are the conditions the IRS will take into consideration when deciding on unfairness for Tax Relief?
The IRS can agree or decline to provide you the Relief by conditions such as:
- Whether you received a direct significant benefit from the concerned understatement, either directly or indirectly.
- Whether you and your spouse are divorced or separated.
- Whether you were deserted by your spouse or former spouse.
How do I file for Innocent Spouse Tax Relief?
You will need to file Form 8857 for relief under this measure. You will need to file an additional 8857 if you’re seeking relief for more than 6 tax years.
When should I file for Relief?
To qualify for Innocent Spouse Tax Relief, you need to file your claim within 2 years after the IRS proposes an increase in your liability on a joint tax statement or issues a notice about said liability.
There are, however, exceptions to the 2-year filing period for equitable relief and relief from liability for tax attributable to an item of community income.
Will my spouse need to be made aware when I file for Innocent Spousal Tax Relief?
Yes. The IRS will be legally obligated to contact your spouse or former spouse to inform them that you have filed for relief, without exception.
The IRS will also need to keep them informed of the proceedings, and initial and final determinations when you file for relief from joint and several liability on joint returns.
The IRS will, however, not disclose any personal information – including your current name, address, place of work, income or assets.
But, any information that the IRS uses to verify your request for relief can be accessed by your spouse.
Is there a difference between Innocent Spouse Tax Relief and Injured Spouse Tax Relief?
Yes. You can file an Injured Spouse Tax Relief when you want to protect your share of a joint tax refund if it gets offset by your spouse’s tax debts or obligations.
To file an Injured Spouse Tax Relief, you’ll need to file Form 8379 either along with your original tax return or after you’ve received a notice about the offset from the IRS.
With Innocent Spouse Tax Relief, you’re seeking protection from a deliberately understated tax liability on your spouse’s part.
If you’re anxious or unclear about whether you qualify for Spousal Relief, get in touch with one of our experts at IRS Solver. We’ll help you verify that you don’t have to pay the price for your spouse’s tax defaults.