Innocent spouse relief is an IRS process that permits persons to avoid paying extra tax, interest, and penalties if their spouse or ex-spouse failed to declare income, erroneously reported income, or incorrectly claimed tax deductions or credits.
Who needs innocent spouse relief?
Married couples can opt to file their income tax returns jointly or independently under current federal tax legislation. What you and your spouse or ex-spouse decide is critical. For example, if a married couple fails to file a joint tax return, numerous sections of the Internal Revenue Code (Code) severely limit or totally eliminate various tax benefits.
However, filing a combined tax return when married might have unintended consequences. This is because the IRS can pursue either spouse for any unpaid taxes or failure to pay taxes that appear on the return.
This policy can predictably lead to unfairness. Assume that one spouse engages in illegal or illicit behaviour without the knowledge of the other spouse and fails to declare any money earned as a result of the illegal behaviour on the joint return. If a joint return has been filed, the IRS can (and frequently does) pursue both spouses for unpaid taxes linked to the illegal income.
If you’re going through a similar situation, you might want to acquire an innocent spouse relief program.
When you file a joint tax return, both spouses are liable for the taxes due. It doesn’t matter who earned what money. In order for one of the spouses to get out of that liability, they need to prove innocent spouse.
There are several ways you can do this. One is by proving that the other spouse did something illegal or erroneous and you had no knowledge. The other thing is proving you did not sign the return, that they signed it for you, and you never met the tax preparer. The third method is proving physical or mental abuse and that you had no option but to sign the tax return.
This is something you should look at if you’re ever going through a divorce or you’ve been divorced and you’re being stuck with a liability from your ex; you want to see if you don’t have to pay it.
Do I qualify for innocent spouse relief?
Each case is unique, but you may be eligible for innocent spouse relief if you were unaware of the tax return that resulted in the extra taxes, penalties, and interest. The following are a few of the requirements for innocent spouse relief:
- You were/are married when you filed a joint tax return.
- Your previous or current spouse misreported income on a joint return.
- You can demonstrate that when you signed the joint return, you didn’t know or had no reason to know that the income was reported improperly.
Considering the circumstances, it would be unjust to hold you responsible for the unpaid taxes.
The IRS will consider whether you received benefits in excess of normal support, whether you were abandoned by your spouse, whether you are currently divorced or separated, and whether you received additional benefits on your tax return to determine if it is unfair to hold you responsible for the unpaid debt. Following the submission of Form 8857, the IRS will investigate the amount you are liable for, if any. Taxpayers, on the other hand, have the option of conducting their own study and presenting other figures to the IRS for consideration.
Those who are disqualified for innocent spouse relief may have been aware that the information on the joint tax return was inaccurate or that income was omitted off the filing, or they may be able to offer further evidence that the initial tax return was completed correctly. Whatever the case may be, based on your unique situation, you may qualify for other tax solutions.
Can I get innocent spouse relief?
In general, filing Form 8857 indicates that your tax situation has become far more complicated than that of the ordinary American taxpayer. If you’re unsure how to continue because you’re unfamiliar with the tax laws, give us a call! We’ll set up a free, no-obligation appointment to go through all of your options for permanently resolving your tax problem.
