Have you ever heard of a couple getting in legal trouble due to back taxes? Maybe you remember the summer of 2013. When the Real Housewives of New Jersey stars Teresa and Joe Giudice were indicted.
Maybe you have no idea who they are but you're experiencing the problem yourself. Your spouse has back taxes and now the IRS is harassing you for payment. Even worse, that's no longer your spouse but the IRS is still after you. Did you know that if your spouse did some sketchy stuff on your taxes you may be able to walk free?
You may be a good candidate for innocent spouse relief. Innocent spouse relief allows a spouse to not be liable for paying tax, interest, and penalties. If your spouse improperly reported or left off items on your tax return. If the IRS grants you this relief, they will only collect from your spouse.
Am I liable for my spouse's tax debt?
When you file as married filing jointly with your spouse you become liable for their debt and vice versa. The term for your responsibility is joint and several liability. This is the reason that I do not recommend couples file together when a tax debt is present.
I advise taxpayers to review their returns before signing them. We are all human, so there will be mistakes from time to time. If you are unfamiliar with your tax return and the terminology here is a resource to help: 15 Tax Terms Every Taxpayer Should Know.
You are signing under penalties and perjury. Which makes you responsible for what your 1040 reports to the IRS. There are situations where a taxpayer is not aware of omissions and errors on the return. If your spouse made those omissions and you were unaware, you may qualify for innocent spouse relief.
Who qualifies for innocent spouse relief?
You must meet a certain set of criteria to qualify for innocent spouse relief. The IRS is the most aggressive collection agency in the country. They do not let taxpayers off free without any work.
You may qualify for innocent spouse relief if:
you filed a joint return with your spouse.
the return shows understated tax due to erroneous items of your spouse or former spouse.
you can show you signed the return not knowing, and had no reason to know, that the understated tax existed.
it would be unfair to hold you liable for the understated tax after taking into account all the facts.
Erroneous items you were unaware of include underreported income or incorrect deductions, credits, and basis. An example of underreported income or incorrect deductions, credits, or basis. Incorrect deductions and credits are those claimed that you know you aren't eligible for.
How do I request innocent spouse relief?
If you meet the above criteria the next thing to do is make the request.
You will need to file Form 8857 as soon as you realize there is a tax liability that only your spouse is liable for. You may become aware of this by the IRS sending a notice and/or proposing to increase your tax liability.
You have 2 years from the date the IRS makes its first attempt to collect the tax from you. There are some exceptions the IRS covers in Publication 971.
It may take up to 6 months (pre-covid) to hear back on your request. During this time the IRS will examine your returns and also contact your spouse. The IRS allows your spouse/ex-spouse to participate in the process and also tell their side of the story.
The IRS will not grant innocent spouse relief if they prove you and your spouse committed fraud together. Such as transferring property to the other or defrauding another third party. This includes creditors, former spouses, or a business partner.
If you do not qualify for innocent spouse relief you may qualify for injured spouse relief. This will allow you to reclaim your portion of a tax refund that was taken for back taxes.
You may not qualify for either. That is okay. If you owe the IRS and cannot pay today you need to set up an installment agreement as soon as possible so back taxes won't ruin your marriage or life.
Timalyn S. Bowens EA is America's Favorite EA and Louisville's Tax Expert that will work hard to find a legal solution that is customized for you! As an Enrolled Agent licensed through the Internal Revenue Service Timalyn is able to fight the IRS for taxpayers in all 50 states.
When you are facing questions regarding your personal or business taxes, working with a professional makes all the difference. At Bowens Tax Solutions, we serve our Louisville-area neighbors by providing the tax services and knowledge needed to succeed. We are here to assist you with your tax issues and preventative care. Visit our website at www.bowenstaxsolutions.com for more information.