Awards & Recognition
Filing a joint tax return can have benefits for both spouses. Unfortunately, it can also have serious financial risks, exposing both individuals to joint and severable personal liability for IRS tax debts arising from fraud or tax evasion committed by the other spouse. Innocent spouse relief unburdens taxpayers who have been forced to shoulder tax debts due to misconduct by a current or former spouse. By filing for innocent spouse relief in San Diego, the taxpayer can gain freedom from tax debts arising from a spouse’s errors.
Criminal Tax Issues and Divorce
If tax fraud has occurred on a married filing joint return both spouses can find them potentially liable for tax fraud. Our firm specializes in criminal tax issues and divorce. Both spouses are at great risk for criminal prosecution for tax fraud if the taxing authorities become aware that tax fraud has occurred during divorce proceedings.
Am I Liable for My Ex’s IRS Debts?
If you filed a joint tax return with your current or former spouse, you can be held financially liable for his or her tax debts. That is because taxpayers who file jointly are considered to assume “joint and several liability” for the total tax liability, meaning both spouses are responsible for the entire amount due.
Unfortunately, this principle applies even in scenarios where one spouse earned all of the income or handled all of the finances for the household. This can leave a financially vulnerable spouse saddled with unexpected IRS debt – even if the couple later gets divorced. Innocent and injured spouse relief seek to redress this situation by relieving spouses of marriage-related tax debts, provided certain criteria are satisfied.
What Types of Tax Debt Relief Are Available for Spouses?
Depending on the circumstances, there are four potential options for individuals who are seeking relief from tax debts assumed through current or former spouses: innocent spouse relief, injured spouse relief, equitable relief, and separation of liability relief. In addition, California allows for innocent spouse relief in certain cases involving state income taxes.
Option #1: IRS Innocent Spouse Relief
IRS innocent spouse relief is regulated by 26 U.S. Code § 6015(b), which outlines the “procedures for relief from liability applicable to all joint filers” of federal income tax returns. In order to obtain innocent spouse relief, the taxpayer must (1) meet certain eligibility criteria, which our innocent spouse relief attorneys have outlined below, and (2) file with the IRS Form 8857 (Request for Innocent Spouse Relief).
It is important to highlight that innocent spouse relief is applicable only to income taxes and self-employment taxes. Other types of tax debts, such as those arising from sales or payroll tax obligations, are not eligible.
Option #2: California Innocent Spouse Relief
California has its own version of innocent spouse relief, which is aptly named “innocent joint filer tax liability relief.” This form of relief is administered by the California Franchise Tax Board (FTB). The FTB explains that “if you meet certain legal requirements, you may qualify for relief from payment of all or part of the tax liability.”
Note that there is no California version of injured spouse relief, which is available exclusively at the federal level.
Option #3: Separation of Liability Relief
Separation of liability relief is available for eligible taxpayers under 26 U.S. Code § 6015(c), which outlines “procedures to limit liability for taxpayers no longer married or taxpayers legally separated or not living together.” Note that knowledge of the incorrect item on the tax return will disqualify you from eligibility for separation of liability relief.
Option #4: Equitable Relief
Equitable relief is a third option, available under 26 U.S. Code § 6015(f), meant for taxpayers who do not meet the eligibility criteria to receive either (1) innocent spouse relief under 26 U.S. Code § 6015(b), or (2) separation of liability relief under 26 U.S. Code § 6015(c).
Option #5: Injured Spouse Relief
You may qualify for injured spouse relief if a portion of your share of your tax refund was diverted to help pay for a spouse’s tax debts or child support debts. Though potentially available at the federal level, the state of California does not offer this form of relief for taxpayers.
IRS Innocent Spouse Relief Eligibility Criteria
Innocent spouse relief is only available for taxpayers who meet certain IRS criteria, which are as follows:
- You filed a joint tax return with your current or former spouse.
- The joint return contains an “erroneous item,” such as unreported income.
- You did not know of (and further, had no cause to know of) any erroneous items on the joint return at the time you signed and filed.
- It would be “unfair” to hold you personally liable for the debt, considering the circumstances. The IRS looks for specific “indications of unfairness” when evaluating requests for innocent spouse relief.
- You can prove that you and your spouse are not engaged in a tax evasion scheme, such as hiding assets from creditors or the government by transferring them to one another.
San Diego Tax Lawyers and CPAs for Innocent Spouse Relief Help
With over 20 years of experience helping our clients navigate complex marriage, separation, and divorce tax issues in California, the innocent and injured spouse relief lawyers at the Tax Law Office of David W. Klasing are here to protect your rights while minimizing the penalties, interest charges, and tax debts you may be facing due to your spouse’s actions. We can even help you appeal if your request for innocent spouse relief is denied. If you need assistance with any aspect of a California or IRS innocent spouse relief application, including help with an issue involving tax evasion and divorce, look to our San Diego tax attorneys for guidance.
Contact us online to schedule a reduced-rate consultation or call our San Diego office at (619) 780-2538. You can also reach our main office by calling (800) 681-1295. Please note that consultations at our San Diego tax office must be scheduled in advance.
Note: If you have concerns about the privacy of our initial or subsequent communication and are unable to easily travel to our Irvine / Orange County Main Office, consider scheduling a GoToMeeting to safely and securely establish an initial or maintain an existing attorney client relationship. With end-to-end encryption, strong passwords and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client. We are generally happy to travel to any of our appointment only satellite offices for a subsequent meeting in appropriate circumstances once a relationship is established via a signed engagement letter and the payment of an initial retainer or where enough retainer is available where a current client to cover the reasonable travel time and time required for the meeting.
Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company? Absolutely not! See our policies that address this issue here:
