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Filing taxes jointly often has pronounced financial benefits for married couples. Unfortunately, filing a joint tax return can also expose spouses to peril. If your current or former spouse reported false information on married filing joint returns, such as understatements of income, you can be held personally liable for any resulting tax debts – including interest and IRS penalties. However, there may be ways to lift the financial burden. If this describes your situation, the Oakland tax attorneys at the Tax Law Office of David W. Klasing can help. By requesting injured or innocent spouse relief – and if necessary, appealing the denial of your request – we can help you achieve freedom from your current or former spouse’s tax debts.
What is Injured or Innocent Spouse Relief? Are There Different Types?
Federal tax regulations establish four distinct types of relief for taxpayers who qualify. The available forms of relief are:
- Innocent spouse relief
- Separation of liability relief
- Equitable relief
- Injured spouse relief
While each type of relief shares a similar end goal – reducing or eliminating the applicant’s liability for his or her spouse’s tax debts – each one is tailored to a specific tax scenario. Even if you do not qualify for other forms of relief, a different option may be well-suited to your case.
Option #1: IRS Innocent Spouse Relief
Innocent spouse relief is available for eligible taxpayers nationwide under 26 U.S. Code § 6015(b). This type of relief is meant for individuals who had no knowledge, or cause to have knowledge, of a current or former spouse’s tax errors. It provides relief from tax debts arising from such errors – for instance, additional taxes that were assessed after an audit because your spouse did not report all income. Our innocent spouse relief lawyers can determine whether this option is right for your situation.
Option #2: IRS Separation of Liability Relief
Separation of liability relief is established by a different section of the same statute, 26 U.S. Code § 6015(c). In contrast to innocent spouse relief, separation of liability relief involves specifically assigning erroneous items, such as underreported income, to whichever spouse originally earned them.
Option #3: IRS Equitable Relief
Equitable relief is a third option for taxpayers who do not fall into either of the preceding categories. Equitable relief, which is established by 26 U.S. Code § 6015(f), may be applicable to an underpayment or understatement of tax.
Option #4: IRS Injured Spouse Relief
If a portion of your share of your tax refund was directed toward repaying one of your spouse’s tax debts or child support debts, you may be an “injured spouse” and qualify for injured spouse relief.
Does California Have Innocent Spouse Relief?
While California does not offer injured spouse relief, it does, through the Franchise Tax Board (FTB), make various other forms of relief available to taxpayers, including equitable relief, relief by separate allocation of liability, traditional innocent joint filer relief, and relief from community income.
IRS Eligibility Criteria for Innocent Spouse Relief
Innocent spouse relief pertains exclusively to income and self-employment taxes, with no bearing on payroll (FICA) or other taxes. In order to qualify, the taxpayer must (1) meet appropriate IRS criteria and (2) file for innocent spouse relief by submitting Form 8857 (Request for Innocent Spouse Relief). To qualify for innocent spouse relief, five standards must be met:
- The taxpayer must have filed a joint tax return with his or her current or former spouse.
- The relevant tax return must have contained “erroneous items” that were reported by the other spouse, meaning undisclosed income and/or improperly claimed credits and tax deductions.
- The taxpayer must successfully establish his or her lack of knowledge concerning the erroneous items. (Similarly, the taxpayer must also demonstrate that he or she had no reasonable cause to know of the violation.)
- The taxpayer must develop and present a cohesive argument as to why imposing liability for an ex’s tax debts “would be unfair,” considering the facts and circumstances.
- The taxpayer must prove that he or she did not in any way act, or plan to act, together with a current or former spouse as part of a tax evasion plot.
Oakland Tax Lawyers and CPAs for Innocent or Injured Spouse Relief in California
It can be shocking to learn that you are being held liable for a debt you thought belonged to someone else – or worse, a debt you were not even aware existed. However, this does not necessarily need to be the end of the line. If you believe that the IRS or FTB has improperly held you liable for your spouse’s outstanding state or federal tax debts, the innocent spouse relief attorneys at the Tax Law Office of David W. Klasing can fight to wipe out or reduce what you owe. Our divorce tax attorneys have decades of experience resolving the complex financial disputes that often arise during or after a marriage, including serious criminal issues involving divorce and tax evasion.
To discuss your tax matter in a confidential, reduced-rate legal consultation, contact our tax firm online, call our Oakland office at (510) 764-1020, or call our main office at (800) 681-1295. Please be advised that our Oakland office is 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:
