Innocent Spouse Relief
Most go into marriage with the best intentions. Unfortunately, sometimes the unexpected happens, particularly when it comes to one of the most dreaded and poorly understood of all responsibilities: taxes. While there are many benefits to filing taxes jointly as a married couple, these benefits also come with considerable responsibility. Namely, the IRS can hold former spouses —even those with divorce decrees indicating the other spouse is solely responsible for paying any overdue taxes— accountable for their former spouse’s tax debts. So, how can innocent spouses protect themselves? Fortunately, the IRS’ Innocent Spouse Relief program allows those in this and similarly precarious situations to file for relief.
What is Innocent Spouse Relief?
Innocent Spouse Relief is one of three types of tax debt relief —along with Separation of Liability and Equitable Relief— available to those seeking relief from the tax debts owed by their current or former spouse. While filing jointly as a married couple makes sense for a number of reasons, the IRS also holds both people responsible —individually and jointly— for any taxes due. Thus, even if only one spouse earned any income in a given year, the IRS can collect the taxes due from the other spouse, even after a divorce.
Innocent Spouse Relief offers clemency to spouses caught in the crosshairs of an IRS investigation into their spouse’s incorrect reporting of their jointly filed taxes. Depending on their circumstances, those unable to qualify for Innocent Spouse Relief may be eligible for Relief by Separation of Liability, which allows spouses to divide the taxes, interest, and penalties owed; or Equitable Relief, which may be available to those who do not qualify for other types of relief, including relief from liability due to community property laws. An experienced attorney can guide clients through the process of identifying and applying for the tax relief options available to them.
Who Qualifies for Innocent Spouse Relief?
Applicants for Innocent Spouse Relief must fulfill specific requirements in order to qualify:
1. For an applicant to be considered an innocent spouse eligible for relief, they must have filed a joint tax return in which the understatement of the taxes owed by their spouse was due to erroneous items. Erroneous items are defined as either: a) unreported income, or b) incorrect deductions or credits.
2. Successful Innocent Spouse Relief applicants will establish they both had no knowledge of the error and had no reason to know about the error when they signed the joint tax return. According to the IRS, reason to know of the error is based on what a “reasonable person in similar circumstances would have known.”
Partial relief is also possible. For example, if the applicant knew of a $5,000 source of income not reported by their spouse, they are not considered innocent and can be held liable for that error. However, if the actual income not reported was $25,000, rather than the $5,000 the applicant knew of, the innocent spouse may be awarded relief from paying taxes, interest, and penalties on the $20,000 income they had no knowledge of.
3. Innocent Spouse Relief applies when the IRS determines that it would be unfair to hold the innocent spouse responsible for the error. In this case, the IRS considers several variables, including whether the applicant benefitted significantly from their spouse’s error, whether their spouse deserted them, or whether they were divorced or separated from their spouse at the time the error was committed.
4. A claim for Innocent Spouse Relief will be denied by the IRS if there is evidence the spouses transferred property between themselves in an attempt to defraud a third party, including the IRS.
While these requirements may help you determine if you might be eligible for Innocent Spouse Relief, only the IRS can make that determination following a formal review. Formal reviews may be requested by submitting IRS Form 8379, a seven-page form consisting of more than 30 multiple component questions, within the time allotted by the statute of limitations.
Why Work With an Attorney to Negotiate Innocent Spouse Relief?
Considering what is at stake, it is important that those seeking to apply for Innocent Spouse Relief work with an experienced attorney throughout the process. Innocent Spouse Relief is a relatively new tax relief alternative that, thus far, has a low approval record. A qualified tax attorney will be able to guide clients through the process, using their experience to inform the decision-making process and ensure the best possible outcome for their client.
An experienced tax attorney will be aware of the time restrictions associated with filing for Innocent Spouse Relief and the particular deadlines that must be met during each step of the process. The two-year limit on applying for Innocent Spouse Relief means every second counts.
In addition to assisting in correctly completing long, complicated forms like Form 8379, a qualified tax attorney can also guide clients through the intricacies of eligibility for this form of relief. For example, spouses temporarily absent from the home are not considered separated and, thus, are likely not eligible for this sort of relief. They may, however, be candidates for other types of spousal tax relief. The best way to determine this is to consult an accomplished tax attorney like those at Pearson Butler, P.C.
Why Work With Our Law Firm?
Unlike larger firms where paralegals and other staff may monitor individual cases, Pearson Butler offers the highest quality legal advice, backed by years of experience helping our clients resolve their tax debt. Moreover, working directly with a Pearson Butler attorney, it may be possible to stop collection proceedings immediately while applying for Innocent Spouse Relief.
At Pearson Butler, our focus is on our clients as people. Our legal counsel strives to offer the information our clients need in order to weigh their options and make an educated decision regarding any legal proceedings or settlements. Pearson Butler attorneys offer clients realistic advice and personally guide clients throughout their legal process.