Often in a marriage, one spouse handles the majority of the finances and gets the taxes done each year. The other spouse may just sign on the line. If a later audit shows that a spouse or former spouse failed to report income or overstated deductions, you could jointly owe additional tax, interest and penalties.
If you were unaware of the tax issues, you may be entitled to relief as an innocent spouse. This would mean the IRS could not collect the back taxes from you. To apply for innocent spouse relief, you must file Form 8857 and meet various criteria.
Innocent spouse relief is only available when you have filed a joint return with a spouse or former spouse. There are two other main requirements:
- When you signed the tax return you had no reason to know or actual knowledge that were errors, such as unreported income or incorrect deductions
- The circumstances would make it unfair to hold you liable for the back taxes
An example of an erroneous item is when a spouse who owns a business and files a Schedule C on your joint return claims $5,000 for business expenses that were actually never paid.
When reviewing if you had actual knowledge or reason to know, the IRS looks at the type of error, your business and educational background, the extent you participated and whether a reasonable person would have questioned an omission or error.
In some cases, the agency may only grant partial relief. This might occur, if you knew that your spouse earned $5,000 gambling and failed to claim it on the taxes. If a later audit found he made $30,000 and reported none of it as income, you would only be jointly responsible for the tax on the $5,000 you knew about.
These cases are usually quite complicated. It is beneficial to seek the help of an experienced tax attorney when responding to an audit or filing for innocent spouse relief.