Couples that say “I do” may tell the IRS “I don’t” when asked if they have knowledge of a spouse’s erroneous taxes. The Innocent Spouse rule, under IRC section 6015, addresses the unfairness in joint tax returns when only one person is responsible for illegal practices.
There are three types of relief from joint and several liability for spouses who filed joint returns:
Innocent Spouse Relief provides you relief from additional tax you owe if your spouse or former spouse failed to report income, reported income improperly or claimed improper deductions or credits.
Separation of Liability Relief provides for the allocation of additional tax owed between you and your former spouse or your current spouse from whom you are separated when an item was not reported properly on a joint return. The tax allocated to you is the amount for which you are responsible.
Equitable Relief may apply when you do not qualify for innocent spouse relief or separation of liability relief for something not reported properly on a joint return and generally attributable to your spouse. You may also qualify for equitable relief if the amount of tax reported is correct but the tax was not paid because of the spouse’s action.
A streamlined approach by the IRS determines equitable relief when the requesting spouse is: no longer married to the tax offending spouse, suffers economic hardship if not granted pardon, and did not know or had no reason to know about the tax fraud. If the requesting spouse does not fit these circumstances, the IRS makes relief decisions on several factors including marital status, economic hardship, knowledge, legal obliciation, significant benefit, compliance and physical/mental health.
Now the IRS has issued a notice to officially and permanently make the time frame in which such relief must be requested to 10 years. This new time limit will not only help spouses applying for future equitable relief, but also those who were denied because they missed the deadline to file.
The IRS innocent spouse rule can not only be complicated, but controversial. If considering pursuing an innocent spouse claim, seek the advice of a C.P.A. at 212 Tax.