Three Types of Innocent Spouse Relief
Received a letter from the IRS demanding payment for joint tax filings that you didn’t know about? You may be considered an innocent spouse by the IRS and may not have to pay taxes your spouse or ex-spouse incorrectly filed. (CPAs, family lawyers, and other tax professionals should familiarize themselves with our post on Boyle V. Commissioner’s changes to Innocent Spouse rules.)
The IRS allows spouses to get relief from additional tax you owe if your spouse or ex failed to report income, reported income improperly, or claimed improper deductions or credits. Known as innocent spouse relief, if you were truly in the dark about your joint finances and taxes, you may not have to pay additional tax.
Eaker Pérez is an experienced attorney that may be able to help you with your complex tax matters. Call today to discuss how you may qualify for innocent spouse relief.
What is Innocent Spouse Relief?
Innocent spouse relief allows you to be relieved from paying taxes, interest, or penalties, accumulated by your spouse if they falsely reported or removed information from their taxes. If your spouse lied on taxes, underreported, or coerced you into filing incorrect tax reports, innocent spouse relief may be an option for you.
When couples get married there are a number of advantages that come with it, including filing taxes jointly. Not only can filing taxes together reduce the amount of tax you pay, it can also make tax season easier to manage. However, if your spouse lies on tax filings, this means you’re also liable for any additional taxes due—even if they’re not your fault.
When you get married and file a joint tax return together, you are seen as one entity in the eyes of the tax law. If your spouse failed to hold up their end of financial responsibility or you were in an abusive relationship that you were left in the dark about your taxes and financial well-being, it can mean you get hit with a big tax bill even if you’re no longer in that relationship.You may even have been part of a tax fraud scheme without knowing it.
In some cases, you may be considered an innocent spouse and may not have to pay additional taxes, penalties, and fees. The IRS has included a tax law called “innocent spouse relief” that is designed for scenarios where relationships were unequal when it comes to taxes or when abuse leads to situations that create unequal tax burdens.
In order to qualify for innocent spouse relief, you must meet certain guidelines outlined by the IRS, including:
- You filed a joint return that your spouse has incorrectly reported, understated, or falsely reported your taxes.
- You make it clear that you had no idea that incorrect reporting or understating was taking place at the time.
- You must also prove that it is unfair to hold you accountable for the responsibility because you were unaware of the tax matters taking place.
Finding out that your spouse or former spouse was dishonest with your finances is difficult enough. You shouldn’t have to carry the burden of their actions.
We are experienced in helping innocent spouses seek relief from tax burdens and may be able to help you. Don’t walk through your tax matters alone. Call today to learn how Eaker Pérez may be able to help you.
What are the three types of innocent spouse relief?
Innocent spouse relief is not always a one size fits all solution for everyone. There are different circumstances to each situation which is why the IRS offers three different types of relief that you may be able to qualify for:
- Innocent Spouse – If your spouse or ex has committed tax fraud and you had no involvement in or knowledge of, you will have to prove to the IRS that you had zero involvement in committing the tax schemes. This can include miscalculations, errors, or even lying about taxes to the IRS. Qualifying for innocent spouse requires that you sign tax filings with no knowledge of tax fraud taking place.
- Separation of Liability -Even if you are no longer married to your partner, you may receive a letter in the mail from the IRS regarding tax crimes committed during the years that you were married. When you legally separate from your partner or are no longer living together, your taxes may be able to be separated more equally and you may have an allocated amount of your joint filing. In short, it means almost exactly what you would expect, a separation of the liability of your former spouses wrongdoings. You must explain to the IRS why you should be relieved of your responsibility of your former spouses tax matters.
- Equitable Relief – If you don’t qualify for innocent spouse or separation of liability, but are still facing concerns with issues where your former spouse avoided paying or underpaid on your property tax, you may qualify for equitable relief. Equitable relief is for those who may not fall within the qualifications of innocent spouse relief or separation of liability. This is most often in situations where an innocent spouse was unable to seek relief during the normal timeline for innocent spouse relief, including abusive relationships.
What can happen if I don’t file?
Even if you have been divorced from your previous spouse for many years, the IRS may send you a letter demanding payment for joint taxes during the years that you were married. In most cases an innocent spouse request must be filed If you plan on requesting innocent spouse relief, keep in mind there is a 2 year timeline on filing for innocent spouse from the first notice from the IRS.
You must fill out an 8857 form and send it to the IRS to start the process. In the 8857 form, you may include any information that you feel the IRS needs to know about your current or previous situation that may help show how or why you qualify for innocent spouse relief. Proving your innocence is a complex process. Working with an attorney to file for innocent spouse relief is often a good step towards resolving tax issues.
If you don’t file for innocent spouse relief, you may be held responsible for your spouse’s tax matters if you filed jointly.
The IRS is serious when it comes to tax misrepresentations. If you signed off on your taxes, unwillingly or unknowingly, your signature shows responsibility for the tax errors. You may face significant financial fines and penalties or even jail time. However, innocent spouse relief may be a solution if you truly didn’t know what was going on or were coerced into a bad financial situation.
You don’t have to deal with tax matters alone. Eaker Pérez is an experienced attorney that is well versed in complex tax matters. Call today to see how we may be able to help you with your situation.