Understanding Your Options When It Comes To Innocent Spouse Relief

Being married can come with a number of financial benefits, but it can also lead to unexpected tax liabilities. If you find yourself facing a tax bill due to your spouse's actions, you may be eligible for innocent spouse relief. This blog post will provide an overview of innocent spouse tax relief, the three types available, and how to apply for relief.

In order to qualify for any type of innocent spouse relief, you must be able to demonstrate that you were innocent of your spouse's tax wrongdoing and that suffering the full burden of the tax liability would be unfair.

The IRS considers a number of factors when determining whether to grant innocent spouse tax relief, including:

• Knowledge of your spouse's tax wrongdoing: The IRS will consider whether you knew or should have known that your spouse was underreporting income or otherwise failing to comply with the tax laws.
• Benefit from your spouse's tax wrongdoing: The IRS will consider whether you benefited from your spouse's tax wrongdoing. For example, if you used the money from your spouse's underreported income to pay for extravagant vacations or other luxuries, you may be less likely to qualify for innocent spouse relief.
• Financial situation: The IRS will consider your overall financial situation when determining whether to grant innocent spouse relief. If you are already struggling financially, the IRS is more likely to find that taking responsibility for the entire tax liability would cause you undue hardship.
• Marital status: The IRS will consider your marital status at the time the tax liability was assessed. While traditionally innocent spouse tax relief and separation of liability relief are typically for married couples filing jointly, there are provisions for common law marriages and for situations where a couple has already filed for divorce (but not yet finalized).
• Efforts to prevent tax wrongdoing: The IRS will consider whether you took any steps to prevent your spouse's tax wrongdoing. For example, if you questioned your spouse about their tax filing habits or consulted with a tax professional, this may help your case.
• Documentation: The stronger your documentation to support your claims, the better. This may include bank statements, pay stubs, emails, or other correspondence that demonstrates your lack of knowledge about your spouse's tax mistakes.

• Your spouse gambled away significant income and failed to report the winnings on your joint tax return.
• Your spouse owned a business and diverted income from the business for personal use without your knowledge.
• Your spouse received significant inheritance income that they failed to report on your joint tax return.
• You were in an abusive relationship and your spouse controlled your access to financial information.

It is important to note that these are just a few examples, and eligibility for innocent spouse relief will depend on the specific facts and circumstances of your case.

Innocent spouse tax relief is a provision in the tax code that allows a spouse to be relieved of some or all of their liability for their spouse's tax debt. This relief is available if the spouse seeking relief can demonstrate that they were innocent of their spouse's tax wrongdoing and that suffering the full burden of the tax liability would be unfair.

There are three main types of innocent spouse tax relief available:

This is the most common type of innocent spouse relief. To qualify for traditional innocent spouse relief, you must meet all of the following requirements:

• You did not know, and had no reason to know, that your spouse was underreporting income or otherwise failing to comply with the tax laws.
• You did not significantly benefit from your spouse's tax wrongdoing.
• Taking responsibility for the entire tax liability would cause you undue hardship.

This type of relief is available if you and your spouse are living separate and apart (legally separated or estranged) at the time the IRS assesses the tax liability. To qualify for separation of liability relief, you must meet all of the following requirements:

• You were not living together at the time the IRS assessed the tax liability.
• You did not file a joint tax return for the tax year in question.
• You did not know, and had no reason to know, that your spouse was underreporting income or otherwise failing to comply with the tax laws

If a spouse doesn't qualify for innocent spouse relief or separation of liability relief, they may seek equitable relief. This type of relief applies when, under the circumstances, it would be unfair to hold a spouse liable for the tax debt. Factors that can lead to equitable relief include:

• Economic hardship
• Spouse's health
• Whether one spouse abused the other
• Whether one spouse deserted the other
• How much of a benefit each spouse received from the unpaid taxes or erroneous items.

As mentioned earlier, there are three main types of innocent spouse relief available:

• Traditional Innocent Spouse Relief: This is the most common type of relief and offers the most complete protection. To qualify, you must meet the strictest criteria, demonstrating complete innocence and undue hardship.
• Separation of Liability Relief: This relief applies if you are already separated from your spouse when the IRS assesses the tax liability. It offers a simpler path to relief but may not eliminate your entire tax burden.
• Equitable Relief: This relief offers more flexibility but requires a case-by-case analysis by the IRS, considering various factors beyond the strict criteria of traditional relief.

Applying for innocent spouse tax relief involves a structured process. Here are the steps you can follow:

• Collect any relevant tax returns, financial statements, and other documents that can support your claim for relief.
• This documentation will be crucial in demonstrating your eligibility and the circumstances that led to the tax liability.

• Depending on the type of relief you are seeking, you will need to fill out the corresponding IRS form.
• The specific form(s) required will be discussed in the next section.

• Once you have completed the necessary form(s), you will need to submit them to the IRS along with the supporting documentation.
• Be sure to follow all the instructions and deadlines carefully to ensure your application is processed efficiently.

• The IRS will review your application and supporting documents to determine if you qualify for innocent spouse tax relief.
• This process can take several months, so it's important to be patient and responsive to any additional requests for information from the IRS.

Throughout this process, it is highly recommended to seek the guidance of a tax professional, such as David J Griggs, who can provide valuable insights and support to increase the likelihood of a successful outcome.

The most common form used for innocent spouse relief applications is Form 8857, "Request for Innocent Spouse Relief."  This form requires detailed information about your financial situation, your spouse's tax wrongdoing, and your efforts to prevent the wrongdoing.

Here are some tips for filling out Form 8857:

• Read the instructions carefully: The instructions for Form 8857 are complex. Be sure to read them carefully before you begin filling out the form.
• Gather all of your documentation: Having all your supporting documents readily available will make completing the form much easier.
• Be honest and complete: Be truthful and provide all relevant information on the form. Do not omit any information that could hurt your case.
• Seek professional help: Consider consulting with a tax professional who can help you complete Form 8857 accurately and effectively.

David J Griggs is a trusted tax professional with extensive experience helping clients through the complexities of innocent spouse relief. David understands the emotional and financial stress that can be caused by tax liabilities, and he is dedicated to helping his clients achieve the best possible outcome.

Don't let your spouse's tax mistakes ruin your financial future. If you believe you may be eligible for innocent spouse relief, contact David J Griggs today for a free consultation. David can help you understand your options and explore the best way forward.