Tax liabilities are shared by both spouses if they file their returns jointly. This means that even when a relationship hits a rough patch or is severed, both partners will continue to be held responsible for any tax dues arising from faulty filing. If you find yourself at the receiving end of the Taxman’s wrath because of an error committed by your spouse, there is scope for respite in the form of IRS Innocent Spouse Tax Relief.
IRS statistics show that only about 1.35 million couples choose to file their taxes separately while almost 54 million returns are filed under the ‘marital joint tax’ category. Of course, there are many advantages to a joint filing, particularly if there is a disparity in the earnings of both spouses and one partner makes significantly less than the other. In this scenario, the couple will end up paying less overall.
So, where is the problem?
In simple words, joint tax filing implies that the liability will be several and joint. This means that if your spouse is untraceable, the IRS can and will come after you for 100% of the tax debt, even if you were not earning while you were married. The liability not only extends to declared earnings but also to hidden income. For instance, if your ex-made a killing at the tracks or at a casino but neglected to tell you about this, you will be held accountable for the tax liabilities on this earning.
What is the solution?
A preventative measure is to keep a close watch on your tax filings even if your spouse is handling the books and if you are not employed. However, if you already find yourself facing the music for your ex-partners misdeeds, you could claim relief under the innocent spouse rule of the IRS.
Till about 2011, the IRS limited the time in which innocent spouses could seek tax relief at 2 years. However, in the last three years, at least for equitable relief, this period has been extended to ten years. The benefits of this are available to those who want to request tax relief in the future as well as to those who were denied relief because they did not file for it within the stipulated period.
Relief to innocent spouses can be granted in three ways!
General innocent spouse relief: This is the highest level of indemnity that can be granted to a spouse and the one that everybody is hoping for. If you get general relief, you will be exempted from all tax responsibilities arising from improper reporting of income as well as failure to report income by your spouse.
Separation of Liability: In this form of relief, the tax debt is allocated between both spouses. If you receive relief under this rule, you will still be liable to pay half or more of what is owned.
Equitable relief: This option is considered when a taxpayer does not qualify for general relief or separation of liability.
IRS Code 6015 has information on the 8 factors that are weighed when the request for tax relief is considered:
To qualify for relief, you will need to meet certain conditions such as:
You can offer reasons as to why it would be unfair to hold you accountable for such tax dues. Request for general relief and separation of liability has to be filed within 2 years after the IRS initiated collection proceedings against you.
If you are denied IRS Innocent Spouse Tax Relief, it would not make sense to reapply hoping to qualify for equitable relief. The process of consideration goes into three steps where the applicant is first considered for general relief, then for separation of liability and finally for equitable relief. The only hope for people who do not qualify for tax indemnity under the innocent spouse rule is to approach the US Tax Court.
Protect yourself from the IRS we can help protect you from taxes incurred in a previous marriage. Call us now and talk to one of our specially trained tax repair specialists to get started on your case. Let Tax Relief Associates Group get you back on the road to freedom from IRS tax debt.