Innocent Spouse Relief

Generally, both spouses are each responsible for paying the full amount of tax reported on a joint return. The IRS can collect from both spouses even if the couple divorces and the IRS does not have to follow the payment arrangements set forth in a divorce decree.

In certain circumstances, however, there are types of relief that may relieve a spouse of the joint tax liability: 1) Innocent Spouse Relief, 2) Injured Spouse Relief, 3) Separation of Liability Relief, and 4) Equitable Relief.

If you think you are a contender for any of them or if your spouse filed an innocent spouse claim, you should contact Ledingham Law today.

What is Innocent Spouse Relief?

Innocent Spouse Relief relieves the requesting spouse from tax debt that arises from their current or former partner’s misreporting or wrongdoing. This form of relief is pivotal for those who were unaware of the tax return inaccuracies and played no part in the oversight or intentional deceit.

It’s essentially a recourse for individuals who, despite signing a joint return, did not contribute to the tax mistake and believe it’s unjust to be held accountable for a partner’s financial mismanagement.

What is Injured Spouse Relief?

Injured Spouse Relief functions when the IRS withholds a joint refund to apply it to a spouse’s outstanding debts, such as federal tax, state income tax, child or spousal support, or a federal nontax debt like a student loan. By applying for Injured Spouse Relief, you assert your right to your share of the refund, ensuring that your contribution to the joint tax payment is acknowledged and protected. This protection is vital for spouses who may otherwise unjustly lose their refund portion due to their partner’s debts.

Initiating the process for Injured Spouse Relief involves accurately completing Form 8379, Injured Spouse Allocation. It is vital to attach this form with your joint tax return, a strategic move aimed at shielding your rightful share of any refund. The IRS’s evaluation of your submitted form plays a pivotal role in determining how the refund will be allocated, ensuring fairness and acknowledging your individual financial input.

What is Separation of Liability Relief?

Separation of liability relief provides that the understated tax allocated to you is generally only the amount that you are responsible for. To request separation of liability relief, you must have filed a joint tax return, you are no longer members of the same household, you were not part of a fraudulent scheme with your ex spouse, you did not have actual knowledge of any erroneous items giving rise to the deficiency. It is important to note that even if you had actual knowledge of only a portion of an erroneous item, the IRS will not grant relief for that portion.

What Is Equitable Relief?

If you do not qualify for innocent spouse relief or separation of liability relief, you may still be relieved of responsibility for tax, interest, and penalties through equitable relief. Equitable relief has various threshold requirements, which are the following:

1. You are not eligible for innocent spouse relief or separation of liability relief;
2. You filed a joint return for the tax year(s) at issue;
3. You timely filed your claim for relief;
4. You did not participate in a fraudulent scheme with your spouse (or former spouse);
5. You did not knowingly participate in the filing of a fraudulent joint return; and
6. The income tax liability is attributable (either in full or in part) to your spouse.