Updated: Sep 6, 2022
Just because your spouse is in trouble with the IRS does not mean that you have to go down with them. Two common forms of relief the IRS offers are innocent spouse and injured spouse relief. Both forms of relief make sure you aren't left holding the bag when the IRS comes to collect.
You may be thinking, "why is this necessary?". When you file a tax return with your spouse you are both jointly and severally liable for the tax liability. This means the IRS can collect from you both of you or either one of you. Even if you get a divorce, you're still on the hook for the taxes due.
So let's take a look at what each option is and how to qualify.
What is innocent spouse relief?
Innocent spouse relief is for taxpayers when their spouse has left income off a tax return. Taxpayers also request this relief when their spouse has been creative with deductions and credits. Claiming them when they don't actually exist. Even though you signed the return you may eligible for relief if you did not know your spouse was lying or negligent.
This form of relief alleviates taxpayers from being liable for tax, interest, and penalties caused by a spouse (or former spouse) improperly reporting items on the return. The IRS receives 47,000 requests for innocent spouse relief a year.
What is injured spouse relief?
Injured spouse relief is for taxpayers that have had their refund taken to repay a debt of their spouse. That means the refund was smaller or completely eliminated by the debt. The IRS may use a tax refund to collect the following debt:
a defaulted student loan.
unpaid child or spousal support.
federal government debt.
Requesting injured spouse relief will protect your portion of the refund. It is good to know what outstanding debt your spouse has before filing a tax return. That way you can request injured spouse relief when filing and not after the IRS has taken the refund.
When can you file for innocent spouse relief?
You should file for innocent spouse relief as soon as you become aware of the fraud or negligence. You can request innocent spouse relief if your spouse or ex-spouse did any of the following:
claimed improper deductions or credits.
claimed fraudulent dependents.
failed to report income.
underreported or overreported income.
The IRS will take into consideration a few things when reviewing your claim.
If you are/were married and filed a joint return.
Your spouse reported income incorrectly.
You can prove that you didn't know the information was incorrect and had no reason to suspect that it was.
If you meet these criteria you can make your request within 3 years of the IRS attempting to collect the extra tax. You will file Form 8857 to make your claim. The IRS will then review your claim and contact your spouse to get their side of the story. It can take up to 8 months to hear back from the IRS with a decision.
When can you file for injured spouse relief?
You should file for injured spouse relief as soon as you know that your refund is at risk of IRS seizure. You can make the request when filing your return electronically or by paper. The process is straightforward but can be very drawn out.
You will file Form 8379, showing the IRS what portion of the refund is yours. The IRS will then review your claim and separate you and your spouse's tax liability. Each of you will be liable for your own debt.
You have 3 years from the date you originally filed your return to make the claim.
Injured and innocent spouse relief will help you not go down holding the bag for tax debt that isn't yours. But you did take vows for better or worse. If your spouse has a tax debt that they can't pay today it may need tax surgery or a band-aid.
For situations where you can pay within 3 years, I recommend my e-book, Guaranteed Payment Plan. Tax surgery situations are often over $50,000 and you can't pay today. You need to get on an installment agreement as soon as possible to get back on the IRS' good side. Because back taxes shouldn't ruin your 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.