In many marital relationships, one spouse files the income taxes, while the other takes a more passive role. Nevertheless, filing a joint income tax return means each spouse agrees to be jointly and severally liable for the tax reportable on the return; in other words, each spouse can be held accountable individually for the full amount of tax owed, including penalties and interest.
The IRS is not an agency known for its compassion. Even so, Internal Revenue Code provisions do allow for innocent spouse relief when it would be unfair to hold one spouse responsible for deficiencies on a jointly filed return. Obtaining innocent spouse relief is no simple task, and may require the help of an experienced tax attorney. However, new revenue procedures from the IRS should make it easier for husbands and wives to avoid paying for their spouse's tax mistakes.
What Factors Will the IRS Consider In Its Innocent Spouse Relief Decision?
True to its name, innocent spouse relief "relieves" a spouse or former spouse of having to pay the tax, interest and penalties on a joint tax return. If you ask the IRS for innocent spouse relief, they will consider all the facts and circumstances of your case in order to determine whether it is unfair to hold you liable. The factors considered commonly include:
- Whether you received a significant benefit in excess of normal support from the understated tax
- Whether you will suffer economic hardship if you are not granted innocent spouse relief
- Whether you had knowledge or reason to know of the understatement or deficiency
- Whether you have made a good faith effort to comply with income tax laws
- Whether you have become separated or divorced since the filing of the return in question
New Innocent Spouse Relief Changes Favorable To the Taxpayer
The IRS recently introduced Notice 2012-8, which creates more favorable terms for those seeking innocent spouse relief. Some of the changes:
- Formerly, an application for innocent spouse relief had to be filed within two years after the IRS acted to collect the tax in question; now an innocent spouse claim may be made up to ten years from the time the tax is assessed
- Before, if the spouse requesting relief remained married to the non-requesting spouse, this fact weighed against relief; now if the spouses remained married, it is considered a neutral factor in the IRS's evaluation
- The presence of abuse inflicted against the spouse requesting relief weighs in favor of granting innocent spouse relief; Notice 2012-8 expands the definition of abuse to include a broader range of emotional subjugation
Consider Filing or Re-filing For Innocent Spouse Relief Under the New Rules
As a taxpayer, the rule change could mean better odds of success in making a new claim for innocent spouse relief; it also means you should consider reapplying for innocent spouse relief if you were denied under the old rules. Contact an experienced tax attorney today to get more information on how you can take advantage of the IRS's new policies.