August 30, 2015

33888568_sWhen a married couple files a tax return jointly, both spouses become equally responsible for all taxes owed. This joint and several liability applies to the tax liability showed on the return, as well as to any additional tax liability due as determined by the IRS. This includes income, deductions, or credits of a spouse.

The IRS can legally collect the liability reported on the tax return from either spouse – regardless of which spouse received the tax benefits or earned the income, and regardless of whether a spouse had any knowledge or control of the family’s finances.

In situations where it may be unfair to hold both spouses liable for one spouse’s tax debts or one spouse’s act of filing a fraudulent tax return, two terms commonly used are injured spouse relief and innocent spouse relief. Take note, however, that an injured spouse and an innocent spouse are very different in the eyes of the IRS.

Injured Spouse Relief

When a married couple files jointly, the entire refund may typically be used to pay off the debt of one spouse. If you are an injured spouse, you may not need to be responsible for the debt of your spouse.

You may be able to obtain injured spouse relief if a portion or all of your share of a tax refund or overpayment was or will be used to pay specific types of your spouse’s due debts. Examples of such are your spouse’s unpaid student loans, spousal support, child support, taxes, and other non-marital tax debts.

In order to qualify for injured spouse relief, you must meet the following conditions:

  • You must have filed a joint tax return with your spouse
  • You must have reported earned taxable income or made estimated tax payments
  • You must not be legally liable for any of the past due amounts

Keep in mind that the amount owed to the IRS must be your spouse’s responsibility, or be linked to him or her from before you were married. If the debt is owed jointly, then you do not qualify for injured spouse relief.

If you believe you qualify for injured spouse relief, file Form 8379 along with your original tax return. The IRS will then calculate any refunds that you might be due.

Innocent Spouse Relief

IRS rules state that taxpayers on a joint tax return are individually responsible for any taxes, penalties, and interest due. Innocent spouse relief provides relief from a joint liability under specific limited circumstances, such as if you were aware of your spouse’s underpaid taxes or had no reason to know that he or she lied about their income.

If you believe that only your spouse should be held responsible for a particular tax liability, you may be able to file Form 8857 for innocent spouse relief provided that you meet the following conditions:

  • You must have filed a joint tax return with an understatement of tax
  • The understatement of tax must be due to your spouse’s erroneous items
  • You must prove that you did not know or had no reason to know that your spouse claimed unsupported deductions or failed to report income when you signed a past joint tax return
  • Establish that it would be unfair to hold you liable for the understatement of tax based on the existing facts and circumstances

Form 8857 should not be filed with your tax return. This form must be prepared manually and mailed to the IRS. Multiple forms need not be filed, as one form can cover several years.

If you are not eligible for innocent spouse relief, it is still possible to qualify for other types of tax relief for innocent spouses such as relief by separation of liability and equitable relief, in which case it’s always advisable to contact a good tax lawyer in Denver.

Categories: Blog, IRS, Taxpayers' Rights