Believe it or not, the IRS does provide relief for a spouse who totally left in the dark. In some cases of fraud, there may be a path out of the position you were put into.
Innocent Spouse Relief – Relief from IRS Tax Issues? Who Qualifies?
Finding out that you owe a hefty tax bill to Uncle Sam is bad enough; however, finding out that you owe that bill because of something your spouse (or former spouse) did of which you were unaware is far worse. It happens all the time though. One spouse prepares the tax return and the other spouse simply signs his or her name. Somewhere down the road a huge, unexpected, tax bill arrives in the mail. The general Internal Revenue Rule is that both spouses are equally liable for the taxes due on a jointly filed tax return; however, under certain circumstances there is relief for a spouse who was unaware that a jointly filed tax return underreported income, improperly claimed credits or deductions, or otherwise caused the couple to incur a tax liability.
There are three types of relief available for an individual who is suffering because of the reporting errors of a spouse:
• Innocent Spouse Relief – if approved, the taxpayer will have no liability for the tax debt.
• Separation of Liability Relief – allocates the tax debt between the wrongdoing and innocent spouse so that the innocent spouse is no longer responsible for the tax debt caused by the wrongdoing spouse.
• Equitable Relief—can be used when the other two options do not apply. Can also be used when the tax debt is correct but it remains unpaid.
By far the most popular, and advantageous, type of relief is the “Innocent Spouse” relief. According to the Internal Revenue Service rules, to file for relief as an Innocent Spouse, the following must be true:
•You filed a joint return that has an understatement of tax (deficiency) that is solely attributable to your spouse’s erroneous item. An “erroneous item” includes income received by your spouse but which was omitted from the joint return. Deductions, credits, and property basis are also erroneous items if they are incorrectly reported on the joint return
•You establish that at the time you signed the joint return you did not know, and had no reason to know, that there was an understatement of tax and
•Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax.
If an application for Innocent Spouse Relief is accepted, the spouse filing the application will no longer be liable for the tax liability for the year in question.
If you feel that your situation may qualify, simply contact our Managing Partner, Andrew Brody at 305-231-2150. Canner Brody and Yan is a Florida CPA firm operating for over 65 years. We provide IRS Tax Resolution, Forensic Accounting and Litigation services to help individuals that may seek Innocent Spouse Relief or Divorce Accounting related services.