What is Innocent Spouse Relief?
Innocent Spouse Relief is a form of tax relief that is available for people who signed a joint return with their spouses and who have good reasons as to why they should not be held liable for additional tax assessed as the result of an audit, or even for the tax that is shown as due on the joint return. At its most expansive level, called Equitable Relief, a request for Innocent Spouse Relief should be granted if, when considering all of the facts and circumstances, it would be unfair to collect the tax liability in question from the person making the request.
Why does Innocent Spouse Relief Exist?
If you file a joint return, the presumption is that you are agreeing that the IRS can collect any underpayments of tax, or any liability that results from an audit from you or from your spouse. This default rule can be found in Section 6013 of the tax code. This can lead to some seriously unfair consequences.
There are several situations where the need or desire to request Innocent Spouse Relief might arise. One common situation is where one spouse has income that was not reported on a joint tax return. If the IRS audits the return, and asserts an additional tax, is it fair to expect the other spouse to pay the balance due after the audit? Maybe, but maybe not.
Another situation is where spouses file a joint return that shows a balance due. Maybe one spouse is self-employed but never pays quarterly estimated taxes. Is it fair for the other spouse to be on the hook for a liability that arose just because the first spouse did not pay enough taxes throughout the year? Maybe, but maybe not.
Will a Divorce Decree Settle the Matter?
Often, Innocent Spouse cases arise in the context of a divorce proceeding. It is important to know that a divorce decree assigning liability for particular taxes to one spouse does not settle the matter with the IRS. The IRS will still try to collect the tax liability from both spouses unless one spouse files a successful Innocent Spouse request. The IRS is not a party to your divorce decree and is not bound by it, but it will still be considered as weighing in favor of relief.
When is Innocent Spouse Relief Available?
Innocent Spouse Relief is available whenever you have a joint tax liability with a current or former spouse. Innocent Spouse Relief is actually available until the IRS can no longer legally collect the tax from the taxpayer. That means you have at least 10 years to file for Innocent Spouse Relief (under “Equitable Relief” provisions laid out in section 6015(f).)
How do I request Innocent Spouse Relief with the IRS?
The most straight-forward way to request Innocent Spouse Relief with the IRS is to file Form 8857. This form will start the process with the IRS. This form contains many traps and elicits answers that might result in the IRS making a determination against the taxpayer, when it should not. It is important to be careful in how information is presented to the IRS so that they understand the situation correctly and do not misinterpret the answers provided.
Are there any “cons” to filing for Innocent Spouse Relief?
Yes. The IRS will have more time to collect the tax liability if a request for relief is denied. This means that a request for Innocent Spouse Relief might create a situation where the spouse who requests relief remains on the hook for a tax liability that has since “expired” as to the other spouse.
Do States offer Innocent Spouse Relief?
Yes. Several states simply follow the same rules as the IRS, while other states have their own versions of Innocent Spouse Relief.