IRS Tax Relief can be found in “Innocent Spouse Relief” if the tax debt arises from a return filed jointly with your spouse. In the case of a joint tax return both spouses share liability for all tax owed. Filing for IRS Innocent Spouse Relief can allow you to be excused from tax debt and penalties.
Defined more broadly in 1998, the Innocent Spouse Relief doctrine allows for IRS tax relief for a spouse who filed a joint return but can show that holding both parties equally responsible for the joint tax liability would be unfair. If certain conditions are met this enables a spouse to be relieved of responsibility for IRS tax, interest, and penalties resulting from the joint tax return. You may be eligible for partial IRS tax relief based on the facts and circumstances of your situation.
Divorce or separation does not automatically qualify you for relief, however it is a factor that the IRS considers.
Filing a joint income tax return has it’s benefits. The drawback is that both spouses are individually and jointly held responsible for all taxes, interest and penalties that result from filing a joint tax return. Sadly, this applies even if you divorce after the return is filed, even if in the divorce decree it states that one former spouse will be responsible to the IRS. In reality one spouse or the other can be held responsible for all the tax due even if all the income was earned by the other spouse. This is why filing for Innocent Spouse Relief is a wise move.
The conditions to qualify for Innocent Spouse Relief are:
A joint tax return has substantial understatement of tax due to unreported taxable income or incorrect tax credits, tax deductions or tax basis provided by your spouse. Unreported taxable income is any taxable income received and not reported on the return by your spouse.
Any unqualified deduction, credits or tax basis of property claimed on the tax return claimed by your spouse that has no basis in fact or tax law. Basically, it is any income that was not reported and deductions that don’t exist and were illegal or non-existent.
To qualify you must show that you did not know, and had no real reason to know that their was a discrepancy or understatement of income or tax. You must show why it would be unfair for the IRS to hold you liable for the discrepancies in the joint tax return, based on the facts and circumstances.
How would you answer these questions:
At the time the joint return was filed, did you believe any tax owed was, or would be, paid? Did your spouse’s income cause the unpaid tax? If the additional tax due is because of an audit, did you know about the unreported income or erroneous items?
The key factor in the Innocent Spouse Relief determination is that you did not know or have reason to know of unreported income.
If you believe you qualify for this form of IRS tax relief file for Innocent Spouse Tax Relief with IRS tax Form 8857. It is advised to consult a tax professional on this matter and to ensure that all options you are entitled to are explored.
This process can appear complicated but it’s as simple as this, if your spouse was cheating on their taxes and you had no knowledge of it, IRS tax relief is available via the Innocent Spouse Relief doctrine.