Skip to content

Qualifying for an IRS Innocent Spouse Determination

The IRS Innocent Spouse Relief program is a legal provision designed to protect taxpayers who have filed joint tax returns. In some situations, one spouse should not be held fully responsible for tax liabilities incurred due to the actions or omissions of their spouse or former spouse. This relief is available under certain conditions and protects those who meet specific criteria. Obtaining relief is challenging, and taxpayers seeking this determination may succeed better by being represented by a tax professional. 

Background and Purpose of Innocent Spouse Relief

When married couples file joint tax returns, both parties are jointly and severally liable for the tax liabilities, including taxes, penalties, and interest. This means the IRS can collect the full amount owed from either spouse, regardless of who earned the income or caused the tax issue. Innocent Spouse Relief addresses situations where holding one spouse responsible for the other’s actions would be unfair.

Types of Relief Available

The IRS provides three main types of relief:

  1. Innocent Spouse Relief (IRC § 6015(b)):
    • Relieves a spouse of responsibility for an understated tax due to the other spouse’s erroneous items.
    • Erroneous items may include unreported income or incorrect deductions, credits, or basis.
  2. Separation of Liability Relief (IRC § 6015(c)):
    • Allocates the understated tax liability between the spouses, relieving the requesting spouse’s share.
    • Available only if the spouses are no longer married, legally separated, or not living together for at least 12 months.
  3. Equitable Relief (IRC § 6015(f)):
    • Applies when the other two types of relief are unavailable, but holding the requesting spouse liable would be inequitable.
    • May provide relief from both understated tax and underpaid tax liabilities.

Qualification Criteria

To qualify for Innocent Spouse Relief, the requesting spouse must meet specific requirements:

1. Filing Jointly

  • The taxpayer must have filed a joint tax return for the year in question.

2. Erroneous Items Attributable to the Other Spouse

  • The understated tax must result from erroneous items, such as unreported income or improper deductions, credits, or basis, attributable to the other spouse.

3. Lack of Knowledge

  • When the joint return was signed, the requesting spouse must not have known, and had no reason to know, of the understatement of tax.
  • Knowledge is evaluated on a reasonable person standard, considering the requesting spouse’s level of education, involvement in financial matters, and access to records.

4. Inequity

  • Holding the requesting spouse liable for the understatement must be unfair. Factors considered include:
    • Whether the requesting spouse significantly benefited from the understated tax.
    • Evidence of spousal abuse or coercion.
    • Financial hardship caused by paying the liability.

5. Timely Application

  • A request for Innocent Spouse Relief must generally be made within two years of the first IRS collection action for the liability.

Process for Requesting Innocent Spouse Relief

  1. Filing Form 8857:
    • Taxpayers must submit Form 8857, Request for Innocent Spouse Relief, to the IRS.
  2. IRS Evaluation:
    • The IRS reviews the claim, gathering additional information from both spouses as needed. Both spouses are notified of the relief request, ensuring fairness.
  3. Appeals and Litigation:
    • If relief is denied, the taxpayer can request an appeal with the IRS Office of Appeals or challenge the decision in the Tax Court.

Factors Affecting Equitable Relief (Rev. Proc. 2013-34)

When determining equitable relief under § 6015(f), the IRS considers various factors, including:

  • Marital Status: Whether the spouses are separated or divorced.
  • Economic Hardship: Whether the requesting spouse would suffer financial difficulty if relief is not granted.
  • Abuse or Coercion: Whether the requesting spouse was subject to abuse, impacting their decision to sign the return.
  • Legal Obligation: Whether the other spouse has a legal obligation to pay the liability under a divorce decree or agreement.
  • Knowledge: Whether the requesting spouse knew or had reason to know about the unpaid or understated tax.
  • Significant Benefit: Whether the requesting spouse significantly benefited from the tax items causing the liability.

Practical Considerations

  • Documentation: Taxpayers should provide detailed evidence to support their claim, including financial records, divorce decrees, and affidavits.
  • Legal Representation: Due to the complexity of the process, seeking professional assistance can improve the chances of a favorable outcome.
  • Interaction with Community Property Laws: In community property states, additional rules apply, potentially complicating the determination of relief.

Conclusion

Qualifying for Innocent Spouse Relief requires a thorough understanding of the eligibility criteria, documentation requirements, and procedural rules. It provides a critical safety net for taxpayers unfairly burdened by joint tax liabilities, ensuring equitable treatment under the tax laws. Taxpayers facing such issues are encouraged to act promptly, seek professional advice, and fully cooperate with the IRS to secure the best possible outcome.