How To Qualify for Innocent Spouse Relief

Most married couples choose to file joint tax returns. The Internal Revenue Code provides that each spouse on a joint return is jointly and severally liable for the taxes owed on the return. Thus, if one spouse fails to report taxable income, the other is held jointly and severally liable for the consequent tax debt. Joint and several liability means that the spouses are held liable together for any tax liability (jointly), but one of the spouses can be held responsible (severally) 

However, the other spouse (who is not the cause for the tax liability) has some options for tax relief. He or she can raise the “Innocent Spouse Relief” before the Internal Revenue Service. This relief is requesting the IRS to remove the liability of the innocent spouse for additional taxes, penalties, and interest owed on income where one spouse failed to report income on the joint tax return. Usually, these are taxes not paid to the IRS due to the other spouse’s business or other activities resulting in additional tax that the other spouse was unaware of.

Taxes involved in Innocent Spouse Relief are not limited to income tax and include the alternative minimum tax (AMT), self-employment taxes (SE), additional taxes, penalties, and interests. 

Requirements To Apply for Innocent Spouse Relief

To qualify for Innocent spouse relief, you must be able to meet all of the following conditions

  1. You filed a joint return that has an understatement of tax due to erroneous items, defined below, of your spouse (or former spouse). 
  1. You establish that when you signed the joint return, you did not know and had no reason to know that there was an understatement of tax. 
  1. Considering all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax.   
  1. You and your spouse (or former spouse) have not transferred the property to one another as part of a fraudulent scheme. A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, ex-spouse, or business partner. 

The IRS will also consider the facts and circumstances surrounding the case to determine whether the electing spouse who filed for innocent spouse relief will suffer unfairness to be held liable for the taxes of the other spouse. Factors include whether the electing spouse received a significant benefit, the liable spouse already deserted the electing spouse or has been divorced or separated, and the electing spouse received a benefit on the return. 

To apply for innocent spouse relief, file Form 8857 and seek legal counsel from an experienced tax attorney. The IRS will review form 8857 and advise you of whether you qualify.

For a complete guide to innocent spouse relief, see IRS Publication 971. The publication includes information on how to request innocent spouse relief, separation of liability relief, and equitable relief.