Innocent Spouse Relief
Liability for Married Taxpayers Filing JointlyThe majority of married taxpayers chose to file their taxes jointly. Generally, married taxpayers take advantage of a higher standard deduction and other tax benefits when filing their taxes together. Though, a great number of those married couples do not understand the possible liability that comes with the joint-filing status. Did you know that filing jointly allows the government to come after either spouse for the full amount of the tax debt, even if the debt or wrongdoing came from the other partner? That is where innocent spouse relief representation is needed. Even a homemaker who earns no income is considered to be liable and responsible for the full amount of any unpaid tax, interest and penalties. For those taxpayers who were once married but are now divorced or widowed are fair game for the IRS or California Franchise Tax Board if they were married during the tax year in question.
Innocent Spouse Relief Offers a Way OutWith over 20 years of combined experience as a CPA and a Tax Attorney, I have an in-depth knowledge of the ins-and-outs of innocent spouse relief. I can help you compile your records and prepare the proper paperwork with the IRS or California Franchise Tax Board. If you are denied innocent spouse relief, I can help you appeal the decision. At a time that you may feel betrayed or hurt, a seasoned tax expert can save you time, money and most important, unnecessary stress. Let me help you find peace of mind. There is a limited time period to request innocent spouse relief. Don’t hesitate, contact me today.
What Can I Do if I am Being Pursued for Taxes that I Know Nothing About?If you are receiving letters from the IRS requesting that you pay a balance owed from a tax year that you were married, it may feel like there is nothing that you can do, even if you didn’t know about the tax owed or allegations made by the IRS. But, there is hope. The government has recognized that in some situations, it would be unfair to relentlessly pursue taxpayers who didn’t have a clue about the underpayment of tax. Thus, Section 6015 of the Internal Revenue Code was created. It creates the possibility of relief for a taxpayer claiming to be innocent in three different ways: 1. If you current or former spouse underpaid taxes filed while you were married and the taxpayer claiming to be innocent did not know or did not have reason to suspect that there could be an underpayment (IRC § 6015(b)), 2. Splitting the liability by allocating items of erroneous income, deductions and credits to the spouse who earned them (IRC § 6015(c)), 3. Equitable relief if the taxpayer claiming innocence does not fall into one of the relief options above but meets other specific requirements (IRC § 6015(f)).
Do You Qualify for Innocent Spouse Relief?
Many married taxpayers would never expect that filing their income tax return jointly with their spouse would result in being liable for their spouse’s tax debt. When a spouse runs into this tax situation, they should speak with a California Tax Attorney and CPA that could navigate them through the IRS innocent spouse relief exception.
The IRS has identified the following five requirements that must be met to qualify for innocent spouse relief:
- You must file a joint return that has an understatement of tax.
- The understatement of tax must result from erroneous items claimed by your spouse.
- You must prove that you did not know or had any reasonable belief that there was an understatement of tax when you signed the tax return with your spouse.
- An examination of the totality of the circumstances reveals that it would be unjust to make an unknowing spouse liable for an understatement of tax.
- The taxpayer must apply for innocent spouse relief two years from the date the IRS assessed a penalty against them.
An understatement of tax is calculated by looking at the difference between the total amount of tax that was supposed to be on your return and the amount of tax that was presented on your return. For instance, if you filed a 2019 tax return and reported $5,000 in taxes while the actual amount was $6,000, you would have a $1,000 understatement of tax.
An erroneous item is a tax credit, deduction, or bases that were not reported on a spouse’s return and income that was not reported.
Separation of Liability Relief
Innocent spouse relief is not the only way that a spouse may qualify for an exemption from their partner’s tax liability. Separation of liability relief is another way to claim an exception from joint and several liabilities when filing a joint return.
This exception allows the separate allocation of any additional taxes owed by you and your former spouse. Separation of liability relief is also available when there is an erroneous item on your tax return, and you are legally separated from your spouse, or you could show you are not living with your spouse.
If a request for separation of liability relief is successful, you will only be liable for your portion of taxes despite filing a joint return. Note that you cannot claim a refund if you receive this form of tax relief.
A married taxpayer could only qualify for equitable relief if they are not eligible for innocent spouse relief or separation of liability relief because their spouse did not report an item on their joint return. It is also possible to successfully apply for equitable relief if the appropriate taxes are reported on your joint return, but it was not paid when the return was filed.
Innocent spouse relief can be a complicated topic for taxpayers, and it would be prudent to retain a legal firm that is skilled and used to handling these tax issues for their clients.
Questions and Answers About Innocent Spouse Relief
- Can I Engage in Tax Planning to Avoid Common Innocent Spouse Relief Scenarios?
- When Can a Taxpayer Qualify for Innocent Spouse Relief?
- Actions The IRS Can Take If You Don’t Seek Innocent Spouse Relief?
- What is Injured Spouse Relief?
- Can I appeal a denial of innocent spouse relief?
- Understatement of income vs. underpayment of tax
- How soon can I file for Innocent Spouse Relief?
- What types of innocent spouse relief are available?
- When Should I Consider Filing for Innocent Spouse Relief?
- I was forced to sign my erroneous return
- My spouse or ex-spouse lied on tax return
- Signed joint return that was wrong. Can I be granted relief
Tax Attorney Can Help with Innocent Suppose Relief
The innocent spouse relief options are complicated as they have various moving parts. While there is no deadline to file for equitable relief (Option 3), your request for relief under Options 1 and 2 must be filed within 2 years of the first collection action. Generally, the first collection action is considered to be the Notice of Deficiency (90 day letter).When looking at the knowledge of the taxpayer claiming innocent spouse relief, the IRS will look at many financial aspects of the marriage including the couple’s financial situation, the innocent spouse’s educational background, the level of involvement in the activity that created the erroneous item and whether a reasonable person would have inquired as to the validity of the item.