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Innocent Spouse Relief: An Overview of This Form of IRS Tax Relief

A tax liability owed to the IRS is subject to efficient and aggressive collection actions. When this liability is owed by two persons as in the case of a jointly filed tax return, one or both individuals may be subject to legal collection actions from both state and federal agencies. It is important to understand that once a joint tax return is filed, both parties may be held equally responsible for any tax liability owed. It is also possible that one person may be held accountable for taxes owed to the IRS. This includes the principal balance as well as interest and penalties that have been applied to the original balance. If one of the parties can prove they are not liable for the other spouses tax liability that party may be granted Innocent Spouse Relief from the IRS. There are three types of spousal relief that may be available to eligible individuals.  Here we look at the original type of spousal relief and two additional forms of relief that are now also available. 

Innocent Spouse Relief

The original and first form of spousal relief is Innocent Spouse Relief. To qualify for this type of relief, one spouse must meet conditions set forth by the IRS, proving they should not be held accountable for their spouse's tax liability. These conditions include:

  • A joint tax return must have been filed for the year you are seeking Innocent Spouse Relief. 
  • An understatement of taxes owed must be contained on the tax return. Your spouse must be responsible for the erroneous items reported on the tax return that result in the understatement of taxes owed.
  • Provide proof that you were unaware of erroneous items reported on the joint tax return.
  • Other conditions or factors that would make it unfair for the IRS to hold you accountable for the back taxes owed.
  • Application for Innocent Spouse Relief must be filed within two years of the first collection attempt made by the IRS.

Separation of Liability

 If you do not qualify for Innocent Spouse Relief you may be eligible for a Separation of Liability if you meet certain requirements. This would allow for the separation of liability, meaning you and your spouse would no longer be held equally responsible for the tax liability but rather an appropriate amount would be allocated to each person. To be eligible for this type of relief, you must prove you were divorced or legally separated from the spouse with whom you filed the joint return. You must prove you were not living with or a member of the same household as the spouse in question. If the IRS can prove you willingly participated in any activity that resulted in the evasion of taxes, you will not be eligible for this type of relief.

Equitable Relief

Finally if you do not qualify for the first two forms of relief, your final option is applying for Equitable Relief. To be considered for this type of relief, you must prove the following:

  • You do not qualify for other spousal relief options.

  • Both you and your spouse did not engage in actions intended to deceive the IRS or avoid paying taxes.

  • The taxes owed have not already been paid.

  • You meet conditions that prove it would be unfair to hold you accountable for the tax liability.

  • You meet conditions proving the tax liability in question is attributable to your spouse or former spouse.

If you feel you are not responsible for a tax liability owed as a result of a joint tax return, consult a tax professional to find out if you qualify for any of the spousal relief options mentioned above.

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