When couples file a joint tax return, each individual is liable for an equal payment of all taxes including penalties and interest for that given year. In the case of divorce or a divorce decree stating that one individual is responsible for the tax debt, the IRS can legally go after just one or even both parties for the entire amount of the tax debt. The IRS recognizes that there are certain situations, such as an understatement of taxes owed, in which it would be unfair to hold both parties liable for the tax debt, so the IRS created the Innocent Spouse Relief.
The rules for Innocent Spouse Relief states that:
• The innocent spouse did not know and would not have had a reason to know that there was an understatement of taxes owed.
• The understatement of taxes owed was the liability of the other individual.
• That it would be unfair to hold the innocent spouse responsible for the actions of the other individual.
Innocent Spouse Relief
When you get married or if you are married, you can file your income tax jointly. Each individual is liable for an equal payment of all taxes including penalties and interest for that given year.
Sometimes though problems arise, for instance, in the case of you or your spouse making mistakes on the tax return resulting in understatement of taxes owed; or you and your spouse get a divorce. The IRS recognizes these certain situations, in which it would be unreasonable to hold both parties liable for the tax debt.
Types of Innocent Spouse Relief
The IRS has three separate forms of innocent spouse relief. Below is a description of each type offered:
Innocent Spouse Relief
- After filing a joint tax return, you or your spouse did not have knowledge there was an understatement of taxes owed due to erroneous items such as unreported income and/or incorrect credits, deductions or basis.
- It was the liability of the other spouse to owe on the understated taxes.
- Your situation must be such that it would be unreasonable for the IRS to hold you responsible for the tax debt owed. The IRS will take a look at whether or not you have benefited from the understatement of taxes owed, if you were abandoned by your spouse or if you have been legally separated or divorced.
Relief by Separation of Liability
Distributes the allotment of additional taxes owed between you and your spouse or ex-spouse. The amount of tax debt to be paid by each individual will be determined by the IRS. There are three criteria you must meet in order to qualify for this type of Innocent Spouse Relief:
- You and your spouse filed a joint federal tax return and have unpaid debt due to the understatement of taxes owed to the IRS.
- You and your spouse must be legally separated, divorced or you are widowed.
- You and your spouse have not been members of the same household after you filed your joint return.
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