What Is Innocent Spouse Tax Relief?

Let’s tackle this right from the beginning. 

As a married couple, you have two options when filing taxes: married filing jointly or married filing separately.  

Married taxpayers filing jointly fill in the same tax return to report their combined income and deduct all allowable combined expenses. 

Couples that file together qualify for multiple credits like:

• Earned Income Tax Credit
• American Opportunity and Lifetime Learning education credits
• Exclusion or credit for adoption expenses
• Child and dependent care tax credit

Similarly, joint fillers get one of the largest standard deductions annually. In addition, they receive higher income thresholds for certain taxes and deductions, which allows them to earn larger incomes while still qualifying for certain tax breaks. 

So What Could Possibly Go Wrong?

Well, a few things could. A joint filing also means joint liability. When in a marriage, two circumstances could impact your joint filing:

• The death of a spouse
• A divorce

Am I Liable For Unpaid Taxes If My Spouse Dies?

So say things go terribly wrong, and your spouse dies. If there are back taxes owed, you are held liable for them. 

When married filing jointly, each spouse in the union is held liable for the joint returns. As such, the death of a spouse does not automatically relieve you of the joint tax liability. 

When one passes on, the executor is responsible for filing a final tax return. As this happens, the IRS might still attempt to settle any back taxes owed out of the deceased’s estate. 

Well, and good if the proceeds resolve the liability. If not, the surviving spouse is liable for the remaining tax liability. 

However, if a spouse dies while filing separately or singly, the surviving spouse is not liable for their liability. 

Am I liable For My Spouse’s Tax Liability If We Are Getting Divorced?  

What happens to your taxes if you are in the middle of a divorce? It’s common to have one spouse unaware of what the other is doing with their finances. 

So scenarios where there are errors like incorrect deductions and misstatement of earnings become dicey when the other spouse is held liable for them. Understandably so. 

Unfortunately, until a divorce is finalized, both parties are liable for the tax liability. This can be yet another factor to be resolved in the divorce. However, if one spouse can prove that the filing spouse did this intentionally, they can qualify for ‘innocent spouse relief’.

Having said that, some spouses absolve the other of responsibility over their taxes in their divorce decree or other legal agreements. Be that as it may, the IRS can still collect taxes from either spouse in the joint filing. 

What Is Innocent Spouse Relief?

Innocent Spouse Relief is an IRS procedure that allows Taxpayers to avoid paying additional taxes, penalties, and interests because their spouse or ex-spouse made errors on their returns, unbeknownst to them. These could be improperly claimed deductions, credits and unreported income. 

Several criteria must be met to claim an Innocent Spouse Relief. These are as follows:

• You must have filed a joint tax return
• You must have been unaware of the mistakes your spouse made in the filing when you signed it
• You had no reason to be suspicious of the return, and neither did you ask any questions regarding the information in the filing.
• The taxpayer must initiate relief efforts within two years of when the IRS first attempts to collect.

If you meet these conditions and the IRS finds it right to relieve you of the joint tax liability, you are relieved of the liability, partially or fully. 

Once you fill in the required forms and file them with the IRS, it can take up to 6 months for a determination to be made. 

Types of Innocent Spouse Relief

Innocent spouse relief is one. 

The other two are:

Separation of Liability Relief

To qualify for this, you just have filed a joint return, and the following requirements must be met at the time of requesting relief:

• You are divorced or legally separated from the spouse
• You’re widowed
• You have not been a member of the household as the spouse for 12 months prior to when you are requesting relief.

Equitable Relief

People that don’t qualify for innocent spouse relief or separation liability relief can apply for equitable relief. 

To qualify for this, the IRS must satisfy that it would be unfair to bill you for the joint tax liability resulting from the filing spouse’s errors under the circumstances at hand. 

Taxpayers must apply for equitable relief during the time when the IRS can collect the tax from them. For fairness, the IRS will contact the other spouse anytime a spouse requests Innocent Spouse Relief. 

Innocent Spouse vs. Injured Spouse

There is one glaring difference between these two. 

Innocent spouse relief is about assigning responsibility for a tax bill. As such, one spouse seeks to be exempted from the jointly filed tax liability. 

On the other hand, injury relief allows an injured spouse to recoup their portion of a tax refund from a joint tax return. This typically occurs when filing a return. At this point, the filing spouse’s security number social security number flags an offset of the entire refund. The non-filing spouse can apply for their portion of the refund by filing Form 8379. Note that this can take a couple of months to process. 

For innocent spouse relief, you need to fill in Form 8857. You can also prepare a statement containing the information that would be required in Form 8857. 

The statement or form should be mailed to:

Internal Revenue Service

P.O BOX 120053

Covington, KY 41012

For a private delivery service, use the following:

Internal Revenue Service

7940 Kentucky Drive, Stop 840F

Florence, KY 41042

You can also fax the form and attachments to the IRS at 855-233-8558. 

Need Help?

While you can go about the process yourself, this is not always advisable. Losing a spouse or going through a divorce are among the most challenging things you will go through in life. 

This is not the time to take on a duel with the IRS; leave that to us. With our years of experience dealing with IRS issues, we have helped clients build and make their case and get positive outcomes from the IRS. Let us do the same for you. Talk to us today.