What is Innocent Spouse Relief? Both spouses are usually liable for taxes owed to the IRS on a joint tax return but one spouse may be able to avoid tax liability to the IRS through the application of what has come to be known as the "Innocent Spouse Doctrine." Under this tax doctrine, a spouse may be excused from tax liability to the IRS for tax and/or tax penalties.
The 1998 tax law broadened the definition of "Innocent Spouse Relief" so that relief from IRS tax liability is now more available for those spouses who filed tax returns jointly, yet the circumstances demonstrate that it would be unfair for the IRS to hold both spouses equally responsible for the joint tax liability. In many of these tax cases, a spouse is relieved of responsibility to the IRS for tax, interest, and tax penalties on a joint tax return. This is called Innocent Spouse Relief.
Many married taxpayers choose to file a joint tax return with the IRS because of certain tax benefits this filing status allows. Both taxpayers are jointly and individually responsible to the IRS for the tax and any interest or tax penalties due on the joint tax return even if they later divorce. This is true even if a divorce decree states that a former spouse will be responsible to the IRS for any tax amounts due the IRS on previously filed joint tax returns. One spouse may be held responsible to the IRS for all the taxes due even if the other spouse earned all of the income.
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The IRS has come up with guidelines for innocent spouse tax relief in order to help taxpayers that are being subjected to IRS problems because of their spouse's actions. In order to qualify, a taxpayer must prove they fit within these guidelines. If they are able to provide the IRS sufficient substantiating proof, they may qualify for innocent spouse tax relief and may not be liable for the taxes caused by their spouses or ex-spouses.
Criteria for possible qualification for Innocent Spouse Relief:
- You filed a joint tax return with the IRS which has a substantial understatement of the tax directly related to grossly erroneous unreported taxable income or the incorrect tax deductions, tax credits or tax basis of your spouse. Unreported taxable income is any gross taxable income item received by your spouse that is not reported on the tax return to the IRS. Incorrect tax deductions, tax credits or tax basis are any tax deductions, tax credits or tax basis of property claimed by your spouse on the tax return filed with the IRS for which there is no basis in fact or tax law.
- You establish that at the time you signed the joint tax return and filed it with the IRS you did not know, and had no reason to know, that there was a substantial understatement of income or tax.
- Taking into account all the facts and circumstances, it would be unfair for the IRS to hold you liable for the understatement of tax.