Most married couples file a joint tax return to save money by filing a return together. One big disadvantage is if you file jointly each spouse is individually liable for any mistakes, errors or intentional misstatements of tax made by the other spouse.
If this happens to you, you can sometimes get tax relief – but be aware, it is not an easy process!
To get Innocent Spouse Tax Relief, you will generally have to show that you did not know, or should have known, that your spouse was misstating something on your tax return.
- Did you sign the tax return indicating a balance owed? If you did, you may not be able to qualify as the IRS considers you to be aware of the tax debt.
- How old is the tax return? If the tax return is more than 2 years old, it was previously decided that it would be too late to qualify for equitable tax relief. Fortuntately, recent changes in tax law beginning in July 2011, have now taken exception to this general rule. Notice 2011-70 now allows you to obtain tax relief on a balance due for a 10-year (or greater) period from the date the taxes were assessed. For credits or refunds, you must generally file Form 8857 within the later of 3 years after the date your tax return was filed or 2 years after the date the tax was paid.
- Did you know the tax was understated? If you knew the tax was understated and you signed the tax return, you will not qualify for Innocent Spouse Tax Relief. You may qualify to innocent spouse relief under other provisions.
- Are you divorced or legally separated? Under the separation of liability requirements the underpayment of tax is allocated between your spouse, or former spouse and you. This type of relief is only for unpaid taxes owed and not tax refunds.
- Is holding you responsible for income taxes owed somehow unfair? If holding you responsible for taxes owed that are attributable to your spouse, or former spouse, is unfair, you may qualify for tax relief under other provisions. The IRS automatically considers equitable relief when they deny a request for the more common, innocent spouse relief.
- Are you a victim of spousal abuse? Special considerations are given to victims of spousal abuse. You must be able to demonstrate that you were abused such as the submission of police reports.
Innocent Spouse Relief is Difficult to Get
Most applicants fail to get tax relief either because (1) they do not qualify or (2) they were incorrectly misled in believing that applying for this type of tax relief was nothing more than just filling out a tax form and hastily mailing it in.
Perhaps the most difficult obstacle to overcome is meeting the “known, or should have known” exception.
It is often quite difficult to demonstrate that a spouse did not know of the tax debt – after all, you signed the return, didn’t you? Did you not know what you were signing? Don’t you have a joint bank account? Don’t you write checks or withdraw money from that account? After all, didn’t you question where the money was coming from? What about the unfairness of holding you liable? After all, didn’t you receive benefits from the apparent omission of an income item on your tax return? These are unfortunately questions the IRS will raise and obstacles you must be able to overcome.
Success in Innocent Spouse Relief Cases
It’s more that just filling out the Innocent Spouse Relief Form 8857. Success in innocent spouse tax relief cases can often be characterized as a function of preparation. Understanding tax law, procedure and policy requires significant time and diligence. Carefully screening new and potential clients helps us to eliminate cases that we may not want to take on and eliminate those cases we cannot win.
Most of all, preparing a complete and thorough documentation of your relief request and underlying factors is a key ingredient to success so you do not need to appeal a denied application where other factors that should have been considered were omitted.