Written by: Claudia Revermann, Co-Founder of Lucent Tax Relief, Attorney at Law, CPA
Only around 5% of married Americans choose to file their taxes separately. Typically, the benefits of joint filing outweigh the risks. However, filing jointly with your spouse means that you are both liable for each other’s tax responsibilities. The IRS refers to this as joint and several liability.
This marriage of liability means that even if your spouse was the only one with a job and you file jointly, you are individually 100% responsible for ensuring that the taxes are filed, are correct and complete, and any balances are paid on time even if you made no income and wouldn’t otherwise owe anything.
A few reasons one may seek relief
- Married at tax time then got divorced
- In the process of separating through tax season
- Spouse illegally withheld income information, maybe gambling winnings or an extra side job
- Spouse fraudulently filed tax documents without your knowledge
- Spouse accidentally reported something incorrectly
- Abusive spouse forged signature on tax documents
3 Types of Relief
Although more typically known as Innocent Spouse Relief, there are actually three different types of relief:
1. Innocent spouse relief: Provides relief from tax you legally owe because your spouse or former spouse withheld income, didn’t report it properly, or claimed deductions or credits they should not have claimed.
2. Separation of Liability Relief: When an item was reported improperly on a joint return and then you legally separate or divorce from your spouse. Separation of liability relief provides the ability to separate the allocation of tax owed between you and your former spouse so you are only responsible for the tax allocated to you.
3. Equitable Relief: If you do not qualify for the first two forms of relief, you may still be eligible for equitable relief if something was understated on a joint return and is attributable to your spouse. This relief may also be applied if the amount of tax reported is correct but any amount of the tax wasn’t paid with the return.
Spousal Relief Requirements
Spousal relief only applies to individual income or self-employment taxes, it cannot be requested for household employment taxes or shared responsibility payments.
Requirements for Innocent Spouse Relief
You must meet all of the following requirements in order to qualify for innocent spouse relief:
- Your joint return has an understatement of tax due to erroneous items of your spouse (or former spouse).
- An erroneous item could be: unreported income, or an incorrect deduction, credit, or property basis.
- At the time you signed the joint return you did not know, and had no reason to know, that there was an understatement of tax.
If you don’t qualify for innocent spouse relief, you can still request separation of liability relief or equitable relief if you meet the other requirements.
Requirements for Separation of Liability Relief
You must meet all of the following requirements in order to qualify for separation of liability relief:
- Your joint return has an understatement of tax due to erroneous items of your spouse (or former spouse).
- You must have been separated, divorced, or living apart from your spouse for the 12 months before you request relief.
- It would be unfair to hold you liable for the understatement of tax. The IRS determines fairness by looking at several factors:
-
- Did you receive a significant benefit, either directly or indirectly, from the understatement?
- Did your spouse (or former spouse) desert you?
- Have you and your spouse been divorced or separated?
- Did you receive a benefit on the return from the understatement?
- You and your spouse (or former spouse) have not transferred property to one another as part of a fraudulent scheme.
Requirements for Equitable Relief
You must meet all of the following requirements in order to qualify for equitable relief:
- Your joint return has an understatement of tax due or you owe taxes when the return is filed, but are unable to pay.
- It would be unfair to hold you liable for the tax due using the same factors as used in separation of liability relief.
Timing Requirements for Spousal Relief
In order to have your case considered, you must request spousal relief no later than two years after the IRS begins collection activities. Once you file your request, you will need to be patient as it could take 6 to 12 months to receive any kind of response from the IRS. It isn’t uncommon for the IRS to deny your first request because they do not have enough information to justify providing relief. If you would like to appeal, you will need to do so within 30 days of receiving your Notice of Preliminary Determination from the IRS.
Relief Application Best Practices
You can apply for all of the spousal relief options using Form 8857. It is a four-page document that will ask several questions about your unique situation and why you believe you qualify for relief. For spousal relief, you must clearly demonstrate that your situation satisfies every one of the requirements listed above.
It is important to back up as many claims as possible with actual proof. It can be difficult to know what types of documentation or evidence to include on your own. This is one of the most difficult types of relief to get, so you may want to look into having a seasoned tax professional assist you with your relief application.
About the Author:
Claudia Revermann, Co-Founder of Lucent Tax Relief, Attorney at Law, CPA
Lucent Tax Relief is a Minnesota based tax relief agency who help good people put their tax problems to rest.
