Innocent Spouse Relief

Joint Liability and Its Consequences

When married taxpayers file a joint return, both spouses are jointly and severally liable for the entire tax due on that return — including any additional tax the IRS later determines is owed. This means the IRS can collect the full amount from either spouse, regardless of who earned the income or who caused the understatement.

This rule creates significant hardship when one spouse is unaware that the other has underreported income, claimed improper deductions, or otherwise created a tax deficiency. Divorce does not eliminate joint liability — even years after a marriage has ended, a former spouse can find themselves pursued by the IRS for taxes attributable entirely to their ex-spouse’s financial activity.

Traditional Innocent Spouse Relief

Traditional innocent spouse relief under Section 6015(b) is available when a joint return contains an understatement of tax attributable to erroneous items of the other spouse. To qualify, the requesting spouse must demonstrate that at the time of signing the return, they did not know and had no reason to know that there was an understatement of tax. Additionally, the IRS must determine that it would be inequitable to hold the requesting spouse liable.

The IRS examines several factors in evaluating these claims, including the requesting spouse’s level of education, involvement in financial decisions, whether they benefited from the understatement, and the nature of the erroneous items. This form of relief can eliminate the requesting spouse’s liability entirely for the portion of the deficiency attributable to the other spouse’s errors.

Separation of Liability

Separation of liability relief allocates the deficiency between the spouses as though they had filed separate returns. This form of relief is available to taxpayers who are no longer married, are legally separated, or have not lived together during the 12 months preceding the election. It allows the requesting spouse to limit their liability to only the portion of the deficiency allocable to their own income and deductions.

This relief is particularly valuable in situations where the deficiency is primarily attributable to the other spouse’s income or deductions, such as unreported business income or inflated business deductions. However, relief may be limited if the IRS can demonstrate that the requesting spouse had actual knowledge of the erroneous items at the time the return was signed.

Equitable Relief

Equitable relief is a broader category that applies when the requesting spouse does not qualify for traditional innocent spouse relief or separation of liability but it would be inequitable to hold them liable. Unlike the other two forms of relief, equitable relief can apply to both understatements (amounts reported incorrectly on the return) and underpayments (amounts properly reported but not paid).

The IRS considers a range of factors in equitable relief cases, including whether the requesting spouse is divorced or separated, whether they would suffer economic hardship if relief is denied, whether the other spouse had a legal obligation to pay the tax, and whether the requesting spouse was a victim of domestic abuse or financial control. We present these factors comprehensively to build the strongest possible case for relief.

The Application Process

Innocent spouse claims are filed using IRS Form 8857. The application requires a detailed narrative explaining the circumstances of the marriage, the requesting spouse’s knowledge (or lack thereof) regarding the tax issues, and the financial and personal factors that support relief. Supporting documentation — including divorce decrees, financial records, and any evidence of the other spouse’s control over finances — strengthens the claim significantly.

The IRS will notify the non-requesting spouse and provide them an opportunity to participate in the process. If the claim is denied, the requesting spouse has the right to petition the Tax Court for review. We guide clients through every stage of this process, from initial evaluation of eligibility through administrative review and, when necessary, judicial proceedings.