My spouse may have committed fraud when filing our taxes. What is Innocent Spouse Relief, and will I qualify for it?

Let’s face it: filing taxes is a complicated endeavor and sometimes, mistakes get made.  But sometimes “mistakes” are made on purpose, and if you’re married to the person making the mistakes you might find yourself in the middle of a tax fraud case.  Innocent Spouse Relief is one way the court can let a marital partner “off the hook” if they weren’t a part of the alleged tax fraud.

For Innocent Spouse Relief to apply, the couple must have filed a joint tax return.  If each partner files a separate tax return, then he or she is only responsible for the information contained on the return he or she signed.  But when a couple files a joint tax return and each of the partners signs it, they become “jointly and severably liable” for the contents of the return.  That means that no matter whose fault a problem actually was, the government can hold either of the people who signed the tax return fully responsible for it—which is why you would be needing Innocent Spouse Relief in the first place.

Innocent Spouse Relief Comes With Restrictions

To qualify, you’ll need to ask the court to limit your liability within two years of the first date the IRS started trying to collect the taxes they say you owe. Innocent Spouse Relief is only available for marital partners who meet three specific criteria:

  1. the problem with your taxes must be that there is an “understatement” on your tax return, meaning that you paid less in taxes than you should have.
  2. the underpayment must have been caused by reporting less income than you should have reported, or no income at all.
  3. you’ll need to be able to prove that you didn’t know about the understatement.

If you can prove all of those things, then the court can grant “relief” to you as the innocent spouse, meaning that the court is cancelling the joint and severable liability for the tax return, leaving only the ‘guilty’ spouse liable for taxes that are owed—but the judge doesn’t have to.  When deciding whether or not to grant Innocent Spouse Relief, the court will consider “all the facts and circumstances” and decide whether or not it would be fair to make you have to pay the taxes that are owed.

“All the facts and circumstances” can include a wide variety of factors, such as:

  • Are you and your partner still married?
  • Have you separated or divorced?
  • Did he or she leave you?
  • Did either you or your spouse gain financially from the underpayment?
  • What level of education do each of you have, and what sorts of financial resources?
  • How involved were you in the household finances, and in preparing the tax return?

Convincing the judge that it would be unfair to make you pay the taxes is hard, which is one reason you should have an attorney help you if you are considering requesting Innocent Spouse Relief.

Remember, there’s a time limit on asking for Innocent Spouse Relief, so if the IRS has contacted you about collecting on an underpayment, please contact us today to schedule a consultation!

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