1.7 Innocent Spouse Rules

Unless you qualify for relief, you are personally liable for any tax due on a joint return you have filed, whether you are still married to the spouse with whom you filed the joint return or you have since divorced or separated.

If you are still married and living with the same spouse, the only way to avoid personal liability on the joint return is to qualify as an innocent spouse under the rules in this section, or to apply for equitable relief from the IRS (1.9).

If you are divorced, legally separated, living apart, or your spouse has died, you may either seek relief under the innocent spouse rules below or you may be able to claim separate liability treatment (1.8) or seek equitable relief (1.9) from the IRS.

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image Caution
Knowledge May Bar Innocent Spouse Relief
The IRS may try to defeat your claim for innocent spouse relief on the grounds that you knew, or should have known, that tax was understated on the joint return.
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Qualifying tests for innocent spouse relief.

You must satisfy all of the following conditions to qualify for innocent spouse relief:

1. The tax shown on the joint return was understated due to the omission of income by your spouse, or erroneous deductions or credits claimed by your spouse. This means that your actual tax liability is more than the amount shown on the joint return. Innocent spouse relief is not available if the right amount of tax was reported on the return but it was not paid. However, where tax was underpaid, you may request equitable relief (1.9).
2. When signing the joint return, you did not know and had no reason to know that tax on the return was understated.
In considering whether you had “reason to know” of the tax understatement, the IRS and Tax Court will ask whether a reasonable person in similar circumstances would have known of it. All facts and circumstances will be taken into account including your education level, business experience, involvement in the activity that gave rise to the understatement, and whether you failed to ask about items on the joint return or about omissions from the return that a reasonable person would have questioned.
Although the “knowledge” test continues to be a significant hurdle, partial relief may be available. If you knew or had reason to know that there was “some” tax understatement on the return but were unaware of the extent of the understatement, innocent spouse relief is available for the liability attributable to the portion of the understatement that you did not know about or have reason to know about.
3. Taking all the circumstances into account, it would be inequitable to hold you liable for the tax. The IRS and courts will consider the extent to which you benefitted from the tax underpayment, beyond receiving normal support. Thus, it is possible to be held liable for a tax understatement that you did not know about or have reason to know about, on the grounds that you benefitted from the underpayment in the form of a high standard of living. The IRS will also consider whether you later divorced or were deserted by your spouse.
4. You file Form 8857 to request innocent spouse relief.
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image Law Alert
IRS Must Notify Non-Electing Spouse
After the filing of Form 8857, the IRS is required to notify the non-electing spouse (or former spouse) of an electing spouse’s request for relief and allow the non-electing spouse an opportunity to participate in the determination. If the IRS makes a preliminary determination granting full or partial relief to the electing spouse, the non-electing spouse may file a written protest and obtain an Appeals Office conference.
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Request for relief must be filed on Form 8857.

You must file Form 8857 to claim innocent spouse relief. You must provide details concerning your finances and your involvement in preparing the joint returns for which relief from liability is sought. The request must be made no later than two years from the date that the IRS first begins collection activity (such as IRS garnishment of your wages) against you for tax due on the joint return. If the request is not made by the end of that two-year period, you will not be granted innocent spouse relief even if you meet the above qualification tests.

Tax Court appeal.

If the IRS denies your request for innocent spouse relief, you have 90 days to petition the Tax Court for review. If you petition the Tax Court, the non-electing spouse has the right to intervene in the proceeding.

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