When filing a tax return, most married couples choose to use the status of Married Filing Jointly. There are typically few downsides to choosing this filing status and it can reduce the amount of income tax owed every tax season. However, something to keep in mind is that whenever you choose to file jointly with your spouse, both partners are considered jointly responsible for what is filed on the tax return. So, if you are not involved in the return filing process or there is a possibility that your spouse has been engaging in financial comings and goings you are not aware of, this is where potential downsides can occur.
For example, if your spouse fails to report something on the tax return, is pocketing cash without having tax withheld, or is claiming itemized deductions on the tax return you did not qualify for, you may be hit with a tax bill you did not see coming and will be responsible for paying it. This is still true even if you are no longer married to the individual with whom you previously filed.
So, what recourse do you have when you find a tax bill in your lap and your spouse/ex-spouse is out of sight? Well, this is where Innocent Spouse Relief comes in.
Qualifications for Innocent Spouse Relief
First and foremost, you must meet all the qualifications for innocent spouse relief, including:
- You filed a joint return which has an understatement of tax due to erroneous items of your spouse (or former spouse).
- Some examples of erroneous items include unreported income or incorrect deductions/basis/credits claimed by your spouse, such as when your spouse is self-employed and is not reporting all income earned in their business or is overstating their business deductions.
- You establish that when you signed the joint return you did not know – and had no reason to know – that there was an understatement of tax.
- For example, is it reasonable that you should have known about the understatement of tax? If your spouse is self-employed, does the money they make is on your return support your joint lifestyle? If your spouse’s business consistently reports little or no net profit, but you and your spouse live an upper middle-class lifestyle, the IRS will assume you knew of the understatement.
- Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax.
These are just a few of the qualifications; for more details, visit IRS.gov.
Innocent Spouse Relief Form
Of course, everyone’s situation is different and it is impossible to know whether or not you should be held responsible for additional tax without knowing your particular situation. However, if you feel that you are entitled to some form of relief, you can start by filing Form 8857, Request for Innocent Spouse Relief. This form will ask you to provide detailed information about your income, monthly expenses, and your participation in the filing of the understated returns, among a variety of other things. Many of the questions are personal in nature and will require time to thoughtfully prepare.
Upon receipt of this document, the IRS will first notify the non-requesting spouse of your request for innocent spouse relief, as they are given a right to participate in the process. The IRS will then look at all the facts and circumstances that went into filing the return to determine whether you qualify for relief, whether full or partial.