Innocent Spouse Relief

If you are married, you and your spouse are most likely filing your federal tax return under one of two status: Married Filing Separately and Married Filing Jointly. Since the IRS encourages couples to file under Married Filing Jointly, there are many tax benefits to doing so, such as:

  • The adoption credit
  • The Earned Income Credit
  • The child and dependent tax credit
  • The American Opportunity Credit and Lifetime Learning Credit for higher education expenses
  • Deduction of net capital losses
  • Deduction for college tuition expenses
  • The student loan interest deductions
  • Roth IRA contributions
  • Traditional IRA deductions
  • Tax-free exclusion of Social Security
  • Tax-free exclusion of U.S. bond interest
  • Credit for the elderly and disabled 1

However, the downside to filing under a Married Filing Jointly status is joint and several liability, a scenario where both parties can be held responsible for filing erroneously and must be accountable for all restitution required. If one spouse earned all the income or improperly claimed deductions or credits, both taxpayers must pay interest, penalties, or additional taxes incurred from previously filed returns, even if they later divorce. In some cases, the IRS understands how only one spouse may be responsible for errors on a tax return, which is why innocent spouse relief is offered to those looking for relief on jointly filed tax returns.

How Does Innocent Spouse Relief Work?

Upon request, you can be relieved of responsibility for paying tax, interest, and penalties on returns improperly reported by your spouse. However, you are still responsible to pay for tax, interest, and penalties on joint and individual returns that do not qualify for relief. Qualification for innocent spouse relief are the following:

  • You filed a joint return which has an understatement of tax due to erroneous items, defined below, of your spouse (or former spouse).
  • Property has not transferred between you and your spouse as part of a fraudulent scheme. Scheming to defraud the IRS or another third party, such as a creditor, ex-spouse, or business partner are examples of a fraudulent scheme.
  • You prove you did not know about an understatement of tax at the time you signed the joint return.
  • It would be unfair to be held accountable for the understatement of tax, considering all the facts and circumstances.2

What Is the Difference Between an Innocent Spouse and Injured Spouse?

An innocent spouse claim provides relief if your current or former spouse deliberately failed to report income to the federal government, whereas an injured spouse status is when all or part of your share of a joint refund is garnished by the IRS to clear financial obligations.3 For instance, if your joint refund was used to pay your partner’s past-due child support, you can file for injured spouse.

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Seeking restitution over back taxes is easy when you get a tax lawyer to represent you before the IRS. No matter if you are seeking innocent spouse or an Offer in Compromise (OIC), our Los Angeles tax attorneys are there to help. Start eliminating your tax bill today by contacting our team at 1-800-290-8160.

Sources:

  1. Betterment – Married Filing Separately: Marriage Tax Benefit or Penalty?
  2. Internal Revenue Service – Innocent Spouse Relief
  3. Internal Revenue Service – Topic No. 205 Innocent Spouse Relief (Including Separation of Liability and Equitable Relief)