As a tax attorney I have been contacted by many individuals who have accrued a tax liability with the Internal Revenue Service and are hoping to obtain some form of spousal relief. In my opinion, the most common form of spousal relief, at least that known by the general public is innocent spouse relief. The article below has been drafted by a Denver tax attorney at The McGuire Law Firm to provide information regarding innocent spouse relief, separation of liability relief and equitable relief.
If you are married, you likely file as married filing joint with your spouse because this type of filing status provides many benefits. However, if your file the tax return owing money to the IRS, or are later audited by the IRS and owe taxes, the tax debt is joint and several liability. This means that each spouse is 100% liable for the whole tax debt. Therefore, a wife may be liable for the entire amount of the 1040 tax debt even if her husband made the vast majority of the money. Even upon divorce, both spouses can be held entirely liable for the tax debt even if a divorce decree states that one taxpayer is responsible for the debt. The reason being, the divorce decree is state law, and the supremacy clause of the United States Constitution would allow federal law to trump the divorce decree. However, there are circumstances whereby one spouse may not be held liable and such options and circumstances will be discussed below.
Innocent Spouse Relief
The IRS may allow you relief for Innocent Spouse Relief if your spouse (or even your ex-spouse failed to report income, reported income improperly and/or claimed improper deductions or credits. To qualify for innocent spouse relief you must meet the following conditions:
– You filed a joint return and there was an additional assessment of tax, which is attributable to your spouse’s erroneous item. An erroneous item could be income that was omitted on the tax return, and/or deductions, credits or basis reported incorrectly on the tax return.
– You can prove that when you signed the return you had no knowledge, nor should you have had knowledge of the items creating the increase in tax.
– Under the circumstances, it would unfair to hold you liable for the tax debt.
Separation of Liability Relief
This type of relief from the IRS allows for an allocation of the tax debt between you and your spouse from whom you are separated from (or ex-spouse) because an item was improperly reported on the tax return. The tax allocated to you, would be the amount you are responsible for. To qualify for Separation of Liability Relief from the IRS, you must meet the following criteria:
– You are legally separated or divorced from the spouse of which you accrued the tax debt with (you may also be widowed)
– You have not lived in the same household as the spouse of which you filed the tax return for a 12 month period ending on the date you file Form 8857 with the Internal Revenue Service.
– If you knew about the items creating the tax debt, you likely do not qualify for Separation of Liability of Relief.
Equitable relief may be considered a catch all relief under these types of circumstances. If you do not qualify for Innocent Spouse Relief or Separation of Liability Relief from the tax debt you may be able to qualify for equitable relief. Equitable relief may apply if you can establish that under the facts and circumstances it would be inequitable and unfair to hold you responsible for the tax liability. You can review these requirements in Publication 971.
If you have questions regarding these types of relief from the IRS speak with a Denver tax attorney by contacting The McGuire Law Firm.