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You filed a joint return with your spouse,
which under subsequent examination by the Internal Revenue Service
results in an understatement of tax. Generally, married taxpayers
who file jointly are both liable for the full amount of tax due.
However, where you can show that when you signed the return that
you did not know, or had no reason to know of the understatement,
or there were certain erroneous items reflected on the return, the
IRS may grant you relief from paying the tax.
When filing a joint return, both spouses are jointly and
individually responsible for the tax and any interest or penalty
due on the return even if they later divorce. This is true even if
a divorce decree states that a former spouse will be responsible
for any amounts due on previously filed joint returns.
The three types of relief to a non-liable spouse are:
-Innocent spouse relief
- Relief by separation of
liability
- Equitable relief
Innocent Spouse
Relief:
By requesting innocent spouse relief, you can be relieved of
responsibility for paying tax, interest, and penalties if your
spouse improperly reported items or omitted items on your tax
return. Generally, the tax, interest, and penalties that qualify
for relief can only be collected from your spouse. However,
you are jointly and individually responsible for any tax, interest,
and penalties that do not qualify for relief. The IRS can collect
these amounts from either you or your spouse.
The three required elements for Innocent Spouse Relief are:
1. You filed a joint return which has an
“understatement of tax” due to “erroneous items” of your
spouse.
2. You 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.
3. Taking into account all the facts and
circumstances, it would be unfair to hold you liable for the
understatement of tax.
“Understatement Of Tax” is generally the
difference between the total amount of tax that should have been
shown on your return and the amount of tax that was actually shown
on your return.
“Erroneous Items” are either (i) unreported
income of your spouse, or (ii) incorrect deduction, credit or basis
claimed by your spouse.
Indications of unfairness considered by the IRS are:
-Whether you received a significant
benefit either directly or indirectly from the understatement.
-Whether your spouse deserted you.
-Whether you and your spouse have
been divorced or separated.
-Whether you received a benefit on the
return from the understatement.
Relief By Separation Of
Liability
Under this type of relief, you allocate (separate) the
understatement of tax (plus interest and penalties) on your joint
return between you and your spouse (or former spouse). The
understatement of tax allocated to you is generally the amount you
are responsible for.
To qualify for this relief, you must have filed a joint return and
meet one of the following conditions: (i) you are no longer married
to, or are legally separated from the spouse with whom you filed
the joint return for which you are requesting relief, or (ii) you
and your spouse are not members of the same household because you
have been living apart for at least 12 months.
Equitable
Relief
May be available where you meet each of the following
conditions:
-You are not eligible for
innocent spouse relief or relief by separation of liability.
-You or your spouse did
not transfer assets to one another as part of a fraudulent
scheme.
-Your spouse did not
transfer assets to you for the main purpose of avoiding the tax or
the payment of tax.
-You did not file your
return with the intent to commit fraud.
-You did not pay the
tax.
-You establish that, taking
into account all the facts and circumstances, it would be unfair to
hold you liable for the understatement or underpayment of the
tax.
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