In many families, one of the spouses is responsible for handling the finances. One spouse may do all of the work filling out a joint tax return for the spouses and the other party signs it, trusting that his or her spouse calculated everything correctly. However, some people improperly complete tax returns, either intentionally or inadvertently, and they end up paying less in taxes than they would have owed, had they done everything as they should have. In such cases, the spouse who did not fill out the tax return may suffer the same penalties as the spouse who did. The IRS has recognized that this can lead to injustice and has a system where innocent spouses can get relief from taxes. The IRS recently changed the rules of the program to help more people.
What Is Innocent Spouse Relief?
When married couples file joint tax returns, they are jointly and individually responsible for all taxes, interest and penalties due to the IRS from the return. The IRS may pursue the full amount due from either spouse individually or both together.
In some cases, the IRS may grant relief from liability for taxes, interest and penalties due to people who can show that their spouses were the ones who improperly reported or omitted information on the couple’s tax return.
In order to qualify for innocent spouse relief, there must be:
- A joint income tax return filed for the petitioner and his or her spouse
- An understated tax amount because of omitted or erroneous information supplied by the petitioner’s spouse
- A showing by the petitioner that he or she signed the tax return without knowing or having any reason to know that the tax amount was understated
- A totality of circumstances that would make it unfair to hold the petitioner liable for the tax deficiency
What Has Changed About Innocent Spouse Relief?
The IRS used to put a two-year time limit on requests for innocent spouse relief. However, in an effort to make the program more equitable, the IRS will:
- No longer apply the two-year time limit to the applications it is currently considering or any that come into the IRS in the future
- Let those whose applications were denied solely due to the two-year time limit reapply for relief
- Not apply the two-year time limit to any pending litigation
- Possibly suspend collection actions in certain circumstances if litigation is already final
How Do Spouses Get Tax Debt Relief?
In order to petition for innocent spouse relief, a person must complete IRS Form 8857, Request for Innocent Spouse Relief. Those who wish to request innocent spouse relief should seek the assistance of a qualified tax attorney who can help ensure they fill out their applications thoroughly and present their cases to the IRS most persuasively.