IRS Gives More Flexibility in Claiming Innocent Spouse Relief

Generally, when you file a joint income tax return, both you and your spouse are jointly and severally liable for the tax. And the IRS can pursue collection actions with either or both spouses. But there are cases when one spouse may be innocent for any of various different reasons and should not be held liable.

The intent of the IRS's innocent spouse relief is to protect you from being held liable for the tax, penalties and interest on a joint return when your spouse improperly reported or omitted items from the tax return. According to the IRS, to qualify for the innocent spouse relief you must establish that when you signed the return, you had no knowledge and no reason to know that the tax was understated. And it must be determined that it would be unfair to hold you liable for the tax.

On July 25, 2011, the IRS announced that it is eliminating the two-year limit for requesting innocent spouse relief. Previously, spouses had to apply for this relief within two years after the IRS first takes collection action against the spouse. Spouses who were not able to apply for innocent spouse relief because the two-year limit had expired can now reapply.

In eliminating this two-year limit, the IRS is taking into account that spouses may not have applied for relief because they were in abusive relationships in which they were victimized. Or they may have been unaware of the IRS collection efforts if their spouse concealed that information or if they have subsequently divorced or separated.

The IRS provides guidance on some of the facts and circumstances it takes into consideration in determining whether you qualify for innocent spouse relief. These include when the taxes owed on a joint return correspond to your spouse, you are no longer married, you though your spouse paid the taxes, you were not aware of changes make on the return, or you suffered abuse during your marriage.

The IRS will also consider whether you significantly benefited by not paying the tax and whether you would suffer a financial hardship, such as not being able to pay for basic living expenses, if you are required to pay the tax. To request innocent spouse relief, or to reapply for relief, you should file Form 8857, Innocent Spouse Relief.

Based on the information you provide on Form 8857 and the facts and circumstances, the IRS determines your extent of liability, if any. On Form 8857 the IRS points out that by law it must contact the person who was your spouse for the years for which you are requesting innocent spouse relief. But your personal information, such as your name, address and employer will be protected.

Sources:

Form 8857, Innocent Spouse Relief, IRS

Innocent Spouse Relief, IRS

Innocent Spouse Tax Relief Eligibility Explorer, IRS

Michelle Singletary, IRS does the 'right thing' for the 'innocent spouse', The Washington Post

Publication 971, Innocent Spouse Relief, IRS