Innocent Spouse Claims

In some circumstances the spouse of a taxpayer may qualify under IRS guidelines for relief from being held liable for tax delinquencies assessed. There are three types of Innocent Spouse claims that taxpayers may consider when evaluating whether they may qualify for this form of relief. The three claims under which Innocent Spouse could be granted are,

  1. Under Reporting
  2. Separation of Liability
  3. Equitable Relief

Underreporting describes a circumstance where you filed a joint return with your spouse that under stated the amount of tax owed due to an error made by your spouse. An underreporting error could occur as the result of omitting income, understating income, overstating deductions, exemptions or credit, misstating the basis in property owned, or by making errors in mathematical calculations. The spouse pursuing an Innocent Spouse claim must be able to show there was an understatement of tax on the filed return, there was a determinable amount of additional tax owed, and that the error can be attributed to the other spouse.

You must be able to show that at the time you filed the joint return you did not know, or have reason to know, there was an understatement of tax on the return. You must also be able to show that, based on the circumstances, it would be unfair to hold you liable. This portion of an Innocent Spouse claim is determined on a case by case basis. The IRS evaluates whether you received a considerable benefit from the understatement of tax, whether you were abandoned by your spouse, whether you are now divorced or separated, whether you suffered abuse, among other considerations.

Ask Attorney Elizabeth Gonsalves if You Qualify Under IRS Guidelines for an Innocent Spouse Claim

Separation of Liability
An Innocent Spouse claim granted on the basis of separation of liability involves allocating only that amount of tax that is attributable to you. This typically means tax liabilities are separated between spouses/ ex-spouses. This type of relief is only available for unpaid tax, it does not provide for refunds. There are three requirements for separation of a liability: 1) you are either divorced or legally separated from the spouse with whom you filed a joint return, and 2) you were not a member of the same household as the spouse with whom you filed the joint return (for any part of the entire tax year).

Equitable Relief
A taxpayer may be eligible for an Innocent Spouse claim through equitable relief if they do not qualify for an Innocent Spouse claim through the other two methods for relief. Equitable relief is the only method for obtaining relief from a tax liability stemming from an underpayment of tax due, not just an underreporting of tax due. With equitable relief a taxpayer may be able to have tax assessments removed by either filing an incorrect return, or filing a correct return showing a balance due that has not been paid. There are a number of requirements for a successful Innocent Spouse claim on the basis of equitable relief. Among them the IRS will consider situations such as, 1) you have shown you are not eligible for either other forms of Innocent Spouse claims, 2) you and your spouse have not been involved in the transfer of assets associated with a fraudulent scheme, 3) you did not file the return with the intent to commit fraud, 4) the liability was your spouse’s fault, 4) the tax owed has not been paid, 5) you did not know or have reason to know that funds intended as payment for tax were misappropriated by your spouse for their sole benefit, or 6) the tax is attributable to you; however, you were the victim of abuse and signed an inaccurate return for fear of retaliation by your spouse.

Statute of Limitations
An Innocent Spouse claim on the basis of Underreporting or Separation of Liability should be pursued within two years from the date collections activity begins on the years in question. The IRS recently modified the statute of limitations for equitable relief claims by eliminating the two year rule.