Awards & Recognition
When filing personal income taxes in San Francisco, married couples have the option to file jointly or separately. Many couples select the former option in order to reap the tax benefits that are associated with filing a joint return, such as eligibility for more tax credits and larger standard deductions. However, while there can certainly be financial perks to filing together, there can also be devastating drawbacks – even if the marriage is later dissolved. However, innocent spouse relief can help.
At the Tax Law Office of David W. Klasing, our innocent spouse relief attorneys have extensive experience making it easier for men and women in San Francisco and beyond to obtain relief from tax debts that were incurred by their spouses or former spouses. If your current or former spouse incurred tax debts, interest charges, or civil tax penalties by failing to report income properly on your joint tax return, our San Francisco tax lawyers can negotiate with the IRS or California Franchise Tax Board (FTB) to seek a reduction in the amount you allegedly owe. We understand that matters of this nature can be painful and stressful to resolve, which is why we are committed to providing sensitive, compassionate tax guidance that takes the burden off of your shoulders throughout the process.
Innocent Spouse Relief vs. Injured Spouse Relief
Filing jointly creates what is known as “joint and several” liability for tax debts. As the IRS explains, “Joint and several liability means that each taxpayer is legally responsible for the entire liability” owed. This includes not only the tax assessment itself, but additionally, any related interest charges or penalties arising from nonpayment or delinquent payments.
Unfortunately, this system can create serious financial problems for taxpayers who were unaware that their husband or wife omitted or underreported income on joint returns – especially because the IRS can effectively ignore the provisions of a divorce decree and pursue a taxpayer for an ex-wife or ex-husband’s debts. To address this scenario and protect taxpayers who would otherwise assume tax debts unjustly, the IRS offers four types of relief:
- Injured spouse relief
- Innocent spouse relief
- Separation of liability relief
- Equitable relief
Our divorce tax lawyers discuss each of these options below.
Option #1: Injured Spouse Relief
“Injured spouse relief” should not be confused with “innocent spouse relief.” You are considered an “injured” spouse if (1) you were entitled to part of a tax refund after filing a joint return, and (2) a portion of that refund has gone or will go toward paying your wife or husband’s tax debts or other unpaid debts.
Option #2: Innocent Spouse Relief
Innocent spouse relief relieves you from liability for “tax, interest, and penalties if your spouse (or former spouse) improperly reported items or omitted items on your tax return.” Eligibility criteria for innocent spouse relief are discussed in detail below. To apply for innocent spouse relief, you must file Form 8857 (Request for Innocent Spouse Relief) with the IRS. Innocent spouse relief is governed by 26 U.S. Code § 6015(b), which broadly addresses “procedures for relief from liability applicable to all joint filers.”
Option #3: Separation of Liability Relief
If you qualify, separation of liability relief allows you to divide liability for the debt(s) between yourself and your former spouse. Erroneous items, which are defined below, will be allocated to the appropriate spouse. Separation of liability relief is provided for under 26 U.S. Code § 6015(c), which establishes the “procedures to limit liability for taxpayers no longer married or taxpayers legally separated or not living together.”
Option #4: Equitable Relief
Equitable relief is available for qualifying taxpayers under 26 U.S. Code § 6015(f). If a taxpayer does not meet the criteria for the other options, it may be possible to obtain equitable relief.
Who Qualifies for Injured or Innocent Spouse Relief in California?
Like most IRS programs, rigorous criteria exist for innocent spouse and other forms of relief. An overview of these criteria is set forth below.
IRS Innocent Spouse Relief
First, it is important to clarify that innocent spouse relief is available exclusively with regard to:
- Income taxes
- Self-employment taxes
In other words, innocent spouse relief will not provide relief from tax debts associated with business or payroll taxes. If you and your spouse own or owned a small business together, an experienced business tax attorney can determine your liabilities and seek methods for reducing them.
Just as innocent spouse relief is not available for all tax debts, it is also not available for all taxpayers. In order to qualify for IRS innocent spouse relief, you must satisfy the following criteria:
- You must have filed a joint tax return with your current or former spouse.
- The joint return must have contained “erroneous items,” resulting in a tax underpayment. IRS examples of “erroneous items” include any income that was not disclosed, in addition to credits or deductions that were claimed improperly.
- You must be able to prove that, at the time you signed the return, you did not know (and further, had no reason to know) about the tax error.
- You must also be able to explain to the IRS precisely why “it would be unfair to hold you liable for the understatement of tax.” When considering whether “unfairness” exists, the IRS will weigh factors such as divorce/legal separation, desertion, and financial benefits where applicable.
- Finally, you must be able to prove that you and your former or current spouse are not working together to commit tax evasion (tax fraud). An example of fraud would include transferring assets to one another in order to avoid paying creditors, the IRS, or other parties who would otherwise be entitled to the assets.
California FTB Innocent Joint Filer Tax Liability Relief
California has several of its own tax agencies, which are collectively responsible for fulfilling, at the state level, the duties administered at the federal level by the IRS. One such agency, the Franchise Tax Board (FTB), offers a California-specific program similar to innocent spouse and related programs offered by the IRS. Like the IRS’ system, the California version of innocent spouse relief, which is called “Innocent Joint Filer Tax Liability Relief,” enables eligible taxpayers to obtain “relief from payment of all or part of the tax liability” connected to the joint return.
While California does not specifically have an injured spouse provision, taxpayers may seek this type of relief at the federal level through the IRS. Moreover, California’s tax laws establish numerous alternatives for those who qualify, including:
- Equitable relief (similar to federal equitable relief)
- Relief by separate allocation of liability (similar to federal separation of liability relief)
- Relief from community income (related to California community property income)
- Traditional innocent joint filer relief (similar to federal innocent spouse relief)
San Francisco Tax Lawyers and CPAs for Injured and Innocent Spouse Relief
Unfortunately, many taxpayers fail to realize that they can be held personally liable for the state and federal tax debts of current or even former spouses – until it is already too late. However, financial relief may be available in the form of innocent spouse relief, injured spouse relief, equitable relief, separation of liability relief, or other forms of relief administered by the Franchise Tax Board or IRS.
With decades of tax and legal experience, our dedicated attorneys and CPAs make the application process easier and more efficient. Additionally, we are ready to appeal a denial of innocent spouse relief on your behalf if your request is rejected.
Don’t assume you are trapped with your spouse’s tax debts until you have fully explored your options. Contact us online for a confidential, reduced-rate consultation about injured or innocent spouse relief, or call our San Francisco tax office at (415) 287-6568. Alternately, you can reach our main office at (800) 681-1295. Please note meetings at our San Francisco office are by appointment only.
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:
