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Innocent Spouse Tax Relief

Generally, husband and wife are held responsible both jointly and personally for a filed joint tax return. However, one of the spouses may obtain a relief of the tax liability for any errors on the return caused by the actions of the other spouse.

Starting from July 22, 1998, the IRS applies a less strict set of requirements to obtain innocent spouse relief for any tax liability arising on or after July 22, 1998, and for any tax liability that remains unpaid. Thus, it became easier to qualify for innocent spouse relief and to prevent abuse of the innocent spouse.

Individuals must choose the form of relief being sought within two years of the IRS beginning the collection of the tax deficiency or assessment. Notice of the election for innocent spouse tax relief must be given to the non-electing spouse who may participate in any hearings on the relief requested.

There are 3 types of Innocent Spouse Tax Relief available to the electing spouse:

  1. Innocent Spouse Relief
  2. Separation of Liability, and
  3. Equitable Relief

In order to qualify for the Innocent Spouse Relief election, the taxpayer must meet all the following requirements:

  • The taxpayer did not know, or have any reason to know, there was an understatement of tax;
  • The filed joint return had an understatement of tax due to erroneous items;
  • All the factors and circumstances considered, it would be unfair to hold the innocent spouse liable.  

Separation of Liability requires that the innocent spouse to have:

  •  Filed a joint return, and either
  • Must not have been a member of the same household with the spouse for a 12-month period ending on the date of the filing of the request for innocent spouse relief or
  • Be no longer married to, or be legally separated from, the spouse with whom the joint return was filed.  

If the first two types of innocent spouse tax relief are unavailable, the taxpayer may still obtain innocent spouse relief from the tax liability, interest and penalties by electing Equitable Relief. To qualify for this type of innocent spouse tax relief, the taxpayer must establish that, under all facts and circumstances it would be unfair to be responsible for the understatement of underpayment of the taxes. Under the Equitable Relief provision, the innocent spouse can get relief from tax liabilities caused by underpayment of tax.