Innocent Spouse and the IRS

During your marriage you will probably have filed a joint tax return.  Upon your divorce or even years later you may regret having signed a joint tax return when the IRS audits your joint returns.

When you filed a joint federal tax return jointly the law says that you are both liable for any taxes due along with any interest or penalties. That means the IRS can ask you to pay for the errors of your spouse — even after divorce.

Under the newly-reformed “innocent spouse” laws there are now three ways to obtain innocent spouse relief: Expanded Innocent Spouse Relief, Separate Liability Election and Equitable Relief.

A. Expanded Innocent Spouse Relief 

To qualify for Expanded Innocent Spouse Relief, the following requirements must be met:

  • A joint return must have been filed
  • The joint return must contain an understatement of tax due to an erroneous item of the other spouse
  • It would be inequitable to hold the taxpayer liable for the tax deficiency

B. Separate Liability Election 
Under the new Separate Liability Election, a taxpayer may be able to limit his or her responsibility for a tax deficiency. Generally, a taxpayer must be no longer married to, be legally separated from, or be living apart from the other signer of the joint tax return for at least 12 months to qualify.

Taxpayers may be able to show they should only pay for the part of any tax liability based on their allocation of tax items — as if they had filed a separate tax return.

C. Equitable Relief 

The new Equitable Relief Measure is designed to help taxpayers who do not qualify for the other two measures discussed. It may help a spouse who was unaware that the tax due was not paid when the joint return was filed.

If you feel that you are a victims of a joint return deficiency you should contact their tax advisors or attorney to see if they may benefit from one or more of the changes in innocent spouse relief.

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