Know Your Rights About IRS Innocent Spouse Relief
Did your ex-spouse leave you with back taxes? Has your current spouse failed to pay the taxes due on a joint tax return? You can be relieved of the obligation to pay your spouse’s taxes through the Innocent Spouse program.
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According to the U.S. Tax Code, if a taxpayer files jointly with his or her spouse, both spouses are jointly and severally liable for the back taxes, even if the couple later separates or divorces. [1] This means the IRS can collect all of the tax, penalty, and interest from either spouse. The IRS does not divide or split the taxes due between the two spouses. The IRS will not honor a divorce decree or separation agreement ordering one spouse to pay all the joint taxes.
Nor does the IRS concern itself with which spouse’s income created the taxes due and owing. The IRS can levy a taxpayer’s refund year after year, even if the tax due is the result of an ex-spouse’s income, regardless of whether the ex-spouse is making payments to the IRS on the balance due, and even if the divorce decree orders the ex-spouse to pay all the taxes.
This is unwelcome news for most taxpayers. However, a tax resolution can be obtained under certain circumstances. The IRS can relieve one spouse of the other spouse’s taxes for a married filing joint tax period. [2] This is generally referred to as the Innocent Spouse Program.
Gatherwright Freeman has extensive experience in filing Requests for Innocent Spouse Relief. We strongly encourage taxpayers to retain professional legal assistance before making a request. Statements made to the IRS in the Innocent Spouse application are retained in IRS files and cannot be unsaid. Crafting a proper narrative and submitting a package of supporting documentation at the initial level of review are key.
There are 3 different situations that can give rise to married filing joint liability and each situation has its own IRS tax resolution, although all are requested by filing the Form 8857, Request for Innocent Spouse Relief [3].
1. True “Innocent Spouse” Tax Relief
Innocent Spouse Relief is available even if the spouses are still married and living together.
In this scenario the taxpayers file a joint return that shows a particular amount of tax or no tax due, but the IRS later reviews or audits the return and assesses additional tax due. This can happen when one spouse omits income from the tax return, but the IRS finds out and assesses additional tax, penalties, and interest. This can also occur if the IRS disallows certain deductions taken by one the spouses.
If the requesting spouse can show the IRS that he or she did not know and had no reason to know about the omitted income or the improper deductions, then the IRS may grant Innocent Spouse Relief as to the additional assessment of tax, penalties, and interest.
To obtain Innocent Spouse Relief the IRS must also determine that under the facts and circumstances, it would be unfair to hold the requesting spouse liable.
Often, what the IRS thinks is fair and what the requesting spouse thinks is fair are not the same thing, so it is important to have proper legal representation before filing for Innocent Spouse. Remember, statements made to the IRS are recorded in their files and cannot be unsaid.
The statute of limitations to apply for traditional Innocent Spouse Relief is no later than 2 years after the date the IRS first attempted to collect the tax from you.
2. Separation of Liability Tax Relief
This type of relief is available only if the spouses have been divorced, separated for 12 months, or widowed.
In this scenario the taxpayers file a joint return that shows a particular amount of tax or no tax due, but the IRS later reviews or audits the return and assesses additional tax due. This can happen when one spouse omits income from the tax return, but the IRS finds out and assesses additional tax, penalties, and interest. This can also occur if the IRS disallows certain deductions taken by one of the spouses.
To obtain Separation of Liability Relief the IRS must also determine that the requesting spouse had no actual knowledge of the omitted income or improper deductions at the time he or she signed the joint tax return. The IRS will waive the requirement of not having actual knowledge if the requesting spouse can show he or she was under duress, such as the victim of spousal abuse, at the time he or she signed the joint tax return.
If a taxpayer receives Separation of Liability Relief, he or she will not be liable for the other spouse’s additional separately allocated taxes.
The innocent spouse statute of limitations to apply for Separation of Liability Relief is no later than 2 years after the date the IRS first attempted to collect the tax from you.
3. Equitable Relief
Equitable Relief is available if a spouse does not qualify for Innocent Spouse Relief or Separation of Liability Relief. It’s a catchall that provides relief if the requesting spouse can show it would be unfair to hold him or her liable for the taxes due.
In this scenario the taxpayers may file a joint return that is later audited resulting in an additional assessment, or the tax may even be due on the face of the return at the time that both spouses signed. Again, the requesting spouse must make a showing that under the facts and circumstances, it would be unfair to hold him or her liable for taxes. These taxes may be due on the original return or may result from a later audit assessment.
This is generally the most difficult type of relief to get, especially if the tax was due on the face of the original return (as opposed to being as assessment resulting from an audit), but it can be done.
The innocent spouse statute of limitations for Equitable Relief is not limited to 2 years and can be applied for at any time during which the IRS can collect from the taxpayer.
The IRS considers factors such as the following when granting Equitable Relief:
• Whether the taxpayers are divorced or permanently separated (favorable if taxpayers are divorced or permanently separated but not required)
• Economic hardship
• Health and mental problems
• Mental or physical abuse
• Whether the requesting spouse benefited from the unpaid taxes
• Compliance by requesting spouse (has the requesting spouse filed and paid all taxes in years subsequent to separating from the other spouse)
If you have filed your own Innocent Spouse request and it was denied, we also assist taxpayers in filing appeals of Innocent Spouse Denials at the IRS Appeals level. You can file with IRS Appeals if you have received an IRS Letter 3016 Innocent Spouse Relief Preliminary Determination (30-day letter).
If you missed the 30-day deadline to file an appeal with IRS Appeals, we assist taxpayers in filing appeals of Innocent Spouse in U.S. Tax Court. You can file with U.S. Tax Court once you have received a Final Determination Letter (90-day letter).
Please contact us if you need help filing Innocent Spouse. Click here to schedule an appointment.
*Special considerations must be made if you live in a community property state that are not discussed in this article.
1. 26 U.S. Code § 6013. Joint returns of income tax by husband and wife.
Subsection (d)(3): If a joint return is made, the tax shall be computed on the aggregate income and the liability with respect to the tax shall be joint and several.
https://www.law.cornell.edu/uscode/text/26/6013
2. 26 U.S. Code § 6015. Relief from joint and several liability on joint return. https://www.law.cornell.edu/uscode/text/26/6015
3. Find Form 8857, Request for Innocent Spouse Relief at https://www.irs.gov/pub/irs-pdf/f8857.pdf
