When married couples file a joint income tax return, federal law requires both spouses to be jointly and severally liable for the return’s full tax liability. Joint and several liability applies not only to the tax liability on a current return but also to any additional tax liability that the IRS later determines to be due. In some cases, the IRS may grant relief to an innocent spouse.
Because spouses remain jointly and severally liable for taxes, the IRS may still collect them, even after a divorce where divorce decree states that a former spouse will assume sole responsibility for payment of the taxes in full. This is true even if the additional tax is due to income, deductions, or credits of a spouse or former spouse.
In certain circumstances, a spouse may be relieved of tax, interest, and penalties on a joint tax return. Three types of relief are available to married persons who filed joint returns:
- Innocent spouse relief.
- Separation of liability relief.
- Equitable relief.
Q: When should a spouse of former spouse consider applying for innocent spouse relief?
As soon as a spouse or former spouse becomes aware of any tax liability for which he or she believes only a spouse or former spouse should be held responsible, the spouse should consider applying for innocent spouse relief by first contacting a tax professional and arranging a consultation. Also, If the IRS is examining a tax return and proposing to increase the liability related to the return, it is time to consider innocent spouse relief.
It is important to note that the necessary forms must be filed no later than two years after the date on which the IRS first attempted to collect the tax. Certain collection activities such as the IRS offsetting an income tax refund against an amount owed on a joint return for another year may start the two-year period. Also, the filing of a claim by the IRS in a court proceeding, including the filing of a proof of claim in a bankruptcy proceeding, as well as the filing of a suit by the United States to collect the joint liability may start the two-year period.
The IRS will inform a spouse or former spouse that a form requesting innocent spouse relief (Form 8857) was filed and will allow the spouse to participate in the innocent spouse relief process. If relief from joint and several liability on a joint return is requested, the IRS must also inform the spouse of its preliminary and final determinations regarding the “innocent” spouse’s request for relief.
The IRS will not disclose personal information such as the applicant’s current name, address, phone number(s), or information about an employer, your income, or your assets, to protect the applicant’s privacy. Any other information provided that the IRS uses to make a determination about a request for innocent spouse relief may be disclosed to a spouse or former spouse.
The amount of time to request equitable relief depends on whether you are seeking relief from a balance due, seeking a credit or refund, or both. Applying for and obtaining innocent spouse relief is not an uncomplicated process. Contact The Gartzman Law Firm to learn more. Call today at (770) 939-7710.
The COVID-19 quarantine allows you to take care of your estate planning needs from the comfort of your home. Take advantage of this temporary situation. Formulating an estate plan requires the assistance of an estate planning and tax professional to help individuals consider all relevant, necessary issues, and precisely prepare and draft their documents. The Gartzman Law Firm can help you formulate an effective estate plan. Call today at (770) 939-7710.