There are three types of Innocent Spouse (Injured Spouse) tax relief.
A. A person may be eligible for relief if the applicant’s spouse or former spouse:
B. Failed to report income;
C. Reported income improperly; or Claimed improper deductions or credits.
It is a common practice for married couples to file joint tax returns, primarily because filing jointly (together) provides certain tax benefits. However, by filing together, both individuals risk later being held legally responsible for the entire amount even if the couple goes through a divorce or if one spouse earned most of the income.
The IRS does not care what your divorce decree states. A divorce decree is a civil agreement between the spouses. The IRS is not going to be involved in anyone's marital problems. That is between you and your spouse. Now, for the "Good News."
Fortunately, in some cases, spouses can get a certain measure of tax relief from liability by applying for Innocent Spouse relief. There are specific deadlines for filing for innocent spouse relief, so if you filed a joint tax return with your spouse, but have since obtained a divorce, it is important to retain the services of an experienced tax professional who can help ensure that your application is shown in your best light and submitted on time.
In order to qualify for Injured Spouse relief, an applicant must satisfy a series of requirements, including that:
a, He or she filed a joint return; The return had a tax deficiency that is attributable to an error made by the applicant’s spouse;
b. The applicant can demonstrate that when he or she signed the joint return, the applicant had no knowledge of the deficiency;
c. and based on all the facts and circumstances, it would be unfair to hold the applicant liable for the tax deficiency.
If these IRS requirements are met, an applicant must submit a request by completing Form 8857 and filing it with the Internal Revenue Service (IRS).
Alternatively, applicants can submit a signed and written statement that contains the same information found on Form 8857. Once the form is submitted, the IRS must notify the applicant’s spouse of the request, which allows him or her the opportunity of providing additional information.
Finally, a request for innocent spouse relief must be filed within two years of the date that the IRS made its first attempt to collect the tax or the applicant will be barred from obtaining relief.
RECEIVING INNOCENT SPOUSE RELIEF IS ALWAYS EXTREMELY DIFFICULT, ESPECIALLY IF YOU TRY TO DO IT ON YOUR OWN. IT MAY BE MUCH EASIER FOR THE INJURED SPOUSE TO SETTLE THEIR TAX LIABILITY WITH AN OFFER IN COMPROMISE.
Owing to the IRS for a tax debt can have financially and emotionally devastating consequences that include a tax levy (wage garnishment), seizure of bank accounts (bank levy), and the placing of tax liens on real property.
IRS penalties and interest will accumulate rapidly, driving taxpayers further and further into tax debt, so if you are being investigated by the IRS, it is vital to contact a dedicated tax professional with a proven track record who can help protect your interests.
For further information, call our IRS problem-solvers for more details.