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If you filed a tax return jointly with your spouse, you are considered joint and severally liable for his or her tax debts – including those arising from tax fraud. Even if you were unaware that your spouse was engaged in income tax evasion, you may still be held responsible for the resulting tax liabilities, financial penalties, and interest charges not to mention you could face criminal tax prosecution yourself. However, by claiming innocent spouse relief or injured spouse relief, you may be able to simultaneously reduce what you owe and your criminal tax exposure. The IRS may even determine that you should not be held liable for certain debts. While certain tax debts are ineligible, such as those pertaining to business or employment taxes, innocent or injured spouse status can nonetheless provide substantial relief from marital tax debt. Note: How a divorce court will allocate tax debt among the parties is a separate but related issue.
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See our Innocent Spouse Relief Q and A Library
Make sure that your application for IRS innocent spouse relief is handled professionally by an experienced innocent spouse relief lawyer, like the award-winning tax attorneys and CPAs at the Tax Law Office of David W. Klasing. With offices in San Jose, our CPAs and tax attorneys have decades of experience assisting taxpayers with spousal tax relief and divorce tax issues, including property transfer and real estate issues, issues involving co-owned businesses, and criminal cases involving divorce and tax evasion. If you are currently going through divorce proceedings or are planning on filing for divorce, review your tax situation with our team of attorneys and CPAs to determine whether you qualify for innocent spouse relief.
Am I Liable for My Spouse’s Tax Debt?
Married couples have the option to file their federal income tax returns jointly or separately. Many choose to file jointly due to the financial benefits that can result, such as a larger standard deduction and greater eligibility for tax credits.
Unfortunately, filing jointly with your spouse can also be a risky tax strategy. By filing together with your spouse, you assume financial liability for his or her tax debts, including interest and penalties. This principle holds true even if the debt arose from tax fraud – and even if you were completely unaware of your spouse’s actions.
The good news is that there may be a way for you to avoid becoming responsible for your spouse’s or ex-spouse’s IRS debts: claiming innocent spouse relief. Alternately, some taxpayers qualify for injured spouse relief, which is related but has different goals and eligibility criteria.
What is the Difference Between Innocent Spouse Relief and Injured Spouse Relief?
Injured and innocent spouse relief both seek to grant financial relief to taxpayers who have been unfairly or improperly held liable for a current or former spouse’s tax debts. However, there are also critical differences between these two forms of IRS debt relief. A tax relief and resolution attorney can help you determine which of the types of innocent spouse relief is right for your situation and would offer you the greatest freedom from marital tax debt.
Innocent Spouse Relief
Innocent spouse relief relieves taxpayers of debts incurred due to a spouse’s misstatements (called “erroneous items,” such as unreported income) on jointly filed returns. The applicant must meet specific eligibility criteria. For instance, it is critical to “establish that at the time you signed the joint return you did not know, and had no reason to know, that there was an understatement of tax.”
Injured Spouse Relief
Injured spouse relief works somewhat differently. This form of relief is aimed toward taxpayers whose tax refunds would be partially or completely directed toward repaying a spouse’s tax debts.
Separation of Liability Relief
Separation of liability relief does not completely relieve you of responsibility for tax debts, but does ensure that you are held liable for only for the amount deemed fair based on your income, your financial assets, and the deductions you claimed.
Equitable Relief
Taxpayers who are ineligible for injured spouse, innocent spouse, or separation of liability relief may qualify for equitable relief. Notably, equitable relief may provide relief from IRS debts arising from the underpayment of tax (i.e. the difference between the amount owed and the amount actually paid).
What if My Request for Innocent Spouse Relief is Denied by the IRS?
To apply for innocent spouse relief, eligible taxpayers must file Form 8857 (Request for Innocent Spouse Relief). Unfortunately, simply filing for relief does not guarantee that the IRS will grant your request. However, even if your request for innocent spouse relief is denied, there may be additional actions you can take. For instance, it may be appropriate to appeal a denial of innocent spouse relief. However, due to the tight timelines and detailed legal requirements surrounding IRS appeals, it is strongly advised to retain the services of an IRS appeals attorney.
San Jose Tax Lawyers and CPAs for Innocent/Injured Spouse Relief in California
Innocent and injured spouse relief were designed to help California taxpayers who have been unfairly held responsible for a current or former spouse’s tax debt. If this describes your situation, ask an injured spouse relief attorney about your eligibility, or the other IRS options that may be available to you. For a confidential, reduced-rate consultation, call the Tax Law Office of David W. Klasing in San Jose at (805) 617-4566, or contact us online to schedule an appointment. Please note that all meetings at our San Jose office must be scheduled in advance.
IRS Innocent and Injured Spouse Relief FAQs
Our tax office commonly receives the following questions about injured and innocent spouse relief:
- How Are Tax Liabilities Handled in a Divorce Settlement?
- How Soon Can I File for Innocent Spouse Relief?
- What Actions Can the IRS Take if You Don’t Seek Innocent Spouse Relief?
- What if My Spouse or Ex-Spouse Lied on Our Tax Return?
- When Should I Consider Filing for Innocent Spouse Relief?
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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:
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