It can be scary when you realize your spouse didn’t file taxes correctly, and now you’re in trouble with the IRS. However, there can be a solution if you are in the dark about these issues.
Innocent spouse relief means that you don’t have to shoulder any responsibility for paying tax, interest, or penalties if your spouse or ex-spouse did not report items correctly on your joint tax return.
Innocent Spouse Relief Categories
When you request innocent spouse relief, it typically falls under two categories: innocent spouse relief and separation of liability relief. There’s also equitable relief, which is a bit more complicated.
1. Innocent Spouse Relief
You may be eligible for innocent spouse relief, if you filed jointly with your spouse but did not accurately report all income and/or expenses on your tax return. Then, the IRS catches it and sends you the bill.
One of the most common causes of understated taxes is Form 1099s. For example, maybe multiple Form 1099s are issued for a spouse’s work, but they miss one or two of them and file the return anyway. Then, a certain amount of income is not included on the tax return which causes an understatement of tax.
Another common cause for innocent spouse relief is when one spouse runs a business in which the other spouse is not involved. Some income from that business is not reported, and then the IRS catches it.
The good news is misreporting usually has to happen multiple years in a row before the IRS audits your returns. So if you realize you did not report a Form 1099 or business income on your tax return, you should amend the tax return and make a payment right away.
However, if the IRS audits you before you catch the mistake, you may be eligible for ] innocent spouse relief if all the following items are true:
- You filed a joint return that underreports the tax due, and the underreported tax was caused by your spouse not correctly reporting something such as income, deductions, credits, etc. (called “erroneous items”)
- You can prove that at the time you signed the joint return you had no idea about any of these erroneous items.
- The circumstances indicate that it would be unfair to hold you responsible for the understated tax.
2. Separation of Liability Relief
Related to innocent spouse relief, separation of liability relief means that you have been divorced, legally separated or widowed, or not living together in the same house for 12 months before filing for innocent spouse relief. You only have to meet one of these requirements.
And the same rules apply to innocent spouse relief: you cannot have known about the understated tax (that your spouse was solely responsible for) when you signed your joint tax return.
3. Equitable Relief
While less common, you may still be able to qualify for equitable relief even if you don’t for innocent spouse relief or separation of liability relief. Equitable relief also applies to situations where the tax was correctly reported on your joint tax return, but the tax has not been paid.
You will need to prove that it’s unfair for you to be responsible for your spouse’s tax underpayments. This one is quite complicated as it involves a lot of different factors, and you’ll need a tax lawyer to help you through all the forms and filing.
How A Tax Lawyer Can Help
It can be quite tricky to prove that you didn’t know about your spouse’s missing tax payments. And it’s even more difficult to navigate what type of innocent spouse relief is right for your case.
However, with the help of a tax lawyer, their mastery of the law can help you prove that you are innocent and qualify for innocent spouse relief. Contact Mindy Meigs expert tax attorney today so she can guide you through the process of obtaining innocent spouse relief.