Innocent Spouse Relief from Tax Debt Owed
When a marriage has problems, finances are almost always at the top of the list as contributing factors. This blog refers to finances particularly, where spouses file a joint tax return, which the both sign as taxpayers. If the information provided on the tax return is false or inaccurate, the IRS has historically viewed both spouses as liable for the resulting assessments. If the relevant taxes were not paid, the IRS would also look to both spouses to pay the delinquent amount. In worse case scenarios, this can include criminal charges for tax evasion.
It is fortunate that, over the years, the IRS has modified its view of the liability of joint filers. The IRS now recognizes that innocent spouses can’t control their deadbeat former spouses. Consequently there are options that will completely separate the liability of each. This allows such innocent spouses to claim three types of tax relief:
Innocent Spouse Relief
Relief by Separation of Liability
If the IRS comes after you for the tax liability of a former spouse, you can seek tax relief under one of these three provisions if you meet all the following requirements. First, you filed a joint return with inaccurate information. Second, you didn’t know of the inaccuracies and didn’t have any reason to. Finally, taking into consideration the situation, holding you liable for the tax would be unfair.
The IRS will evaluate your application and render a ruling on your application. The IRS may agree to simply waive any tax claim against you and go after the deadbeat spouse as the sole debtor. Alternatively, the IRS may split the tax liability into two separate accounts, only requiring you to pay one half of the amount due. While this may not sound great, it will immediately cut your tax debt in half.
In rare cases, you can seek equitable relief from the IRS. Equitable relief simply is another way of saying making you pay the tax would be manifestly unfair. You must show you and the spouse did not transfer assets as part of an fraudulent scheme, didn’t transfer assets with the intention of evading taxes, didn’t intend to commit fraud, didn’t pay the taxes due and you didn’t know what your spouse was up to. Equitable relief claims need to be handled very carefully as the IRS views them with a very cynical eye. Nonetheless, they are a last step that can be taken when all else has failed.