Most married couples elect to file a joint federal income tax return due to the financial advantages of this filing option, notably a higher standard deduction, potential ability to place the higher-earning spouse into a lower tax bracket, and broadened eligibility for various tax credits, such as the Child Tax Credit. While there are a myriad of incentives for married couples to file jointly, there can also be drawbacks to filing taxes with your spouse, including assumption of joint and several liability for tax debts. In plain language, that means the Internal Revenue Service (IRS) can come after you and your assets to satisfy your spouse’s unpaid tax debts – even if you file for separation, file for divorce, or lose your partner to an illness or accident. Should you find yourself in this difficult financial position, you may qualify for relief under an IRS program known as “innocent spouse relief.”
Who is Eligible for Innocent Spouse Relief?
Our California tax attorneys previously answered this question in detail. However, to provide a quick overview of the eligibility standards for claiming innocent spouse status, the spouse who is requesting relief, known as the “Requesting Spouse” or “RS” (as opposed to the “Non-Requesting Spouse” or “NRS”), must meet the following criteria:
- The RS must have “filed a joint return that has an understatement of tax (deficiency) that’s solely attributable to your spouse’s erroneous item.” This means that (1) the RS and NRS filed jointly, (2) the jointly-filed return contained inaccurate information, leading to underpayment of tax, and (3) the error on the jointly-filed tax return was attributable exclusively to the NRS, as the RS “did not know, and had no reason to know, that there was such understatement.” These criteria are respectively set forth under 26 U.S. Code § 6015(b)(1)(A), 26 U.S. Code § 6015(b)(1)(B), and 26 U.S. Code § 6015(b)(1)(C). As the IRS notes, an “erroneous item” could mean:
- Unreported income.
- An improperly reported credit or deduction.
- In accordance with S. Code § 6015(b)(1)(D), it would, “taking into account all the facts and circumstances, [be] inequitable to hold the [RS] liable for the deficiency in tax for such taxable year attributable to such understatement.” In other words, it would be unjust to hold the RS accountable, considering all pertinent details.
- The RS must abide by certain time limits: specifically, the request for relief must be filed within two years of the first collection action, which is typically the CP3219N, better known as a “90-Day Letter” or “Notice of Deficiency,” issued by the IRS. This requirement is set forth under U.S. Code § 6015(b)(1)(E).
How to Request Innocent Spouse Relief
An eligible taxpayer must file Form 8857 (Request for Innocent Spouse Relief) in order to be granted innocent spouse status. In addition, the taxpayer should attach to Form 8857 a written statement explaining why the taxpayer believes that he or she is a suitable candidate for the requested relief. Form 8857 and the attached statement should be mailed to the following address:
Internal Revenue Service
P.O. Box 120053
Covington, KY 41012
If the taxpayer is not using the United States Postal Service, documents should instead be mailed to:
Internal Revenue Service
201 West Rivercenter Boulevard, Stop 840F
Covington, KY 41011
Contact an Experienced Attorney-CPA for Help with Divorce-Related Tax Issues
Writing in the October-November 2017 issue of the Journal of Tax Practice & Procedure, CPA Steven L. Jager highlighted some of the legal perils confronting CPAs and EAs in innocent spouse cases, noting, for instance, the risk of being accused of “practicing law without a license” by an “angry Non-Requesting spouse” and his or her attorney. While a knowledgeable CPA or EA will take appropriate steps to surmount these obstacles, a dually-certified attorney-CPA, who combines the diverse skill sets of both a tax lawyer and financial advisor, may provide the most hard-hitting, well-rounded, and efficient representation – particularly in a scenario where the RS and NRS are navigating emotional, contentious divorce proceedings. Moreover, an attorney-CPA can provide a vigorous defense to tax evasion charges or related charges, should the IRS investigate you or your spouse for suspected tax crimes.
Whether you wish to file for innocent spouse relief, wish to appeal a denial of innocent spouse relief, have questions about alternate options such as separation of liability relief, have general tax preparation questions about how to choose the optimal filing status, or have any concerns about the potential tax consequences of divorce, you should review your legal options with a dedicated attorney-CPA who can protect your best interests while negotiating aggressively with the IRS. To speak confidentially about divorce-related, separation-related, or marriage-related tax issues in a reduced-rate consultation, including matters involving tax evasion and divorce, contact the Tax Law Office of David W. Klasing online, or call (800) 681-1295 today.
Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices in San Bernardino, Santa Barbara, Panorama City, and Oxnard! You can find information on all of our offices here.
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What are common tax issues that nonfilers face
https://www.youtube.com/watch?v=fPxse0jStTw
Common issues with IRS collection actions
https://www.youtube.com/watch?v=PYaLOWpLdEo
Divorce & Criminal Tax Issues
