There are three different types of innocent spouse relief. The IRS offers these defenses to taxpayers who want relief from the joint and several liability that is imposed on married taxpayers who file joint returns.
Traditional Innocent Spouse Relief
To qualify for traditional innocent spouse relief, you must meet all of the following conditions:
- the understatement of tax liability on your joint return must be solely attributable to your spouse’s erroneous item
- at the time you signed the return you did not know, or have reason to know, that the item was erroneous, and
- taking into account all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax
The form of innocent spouse relief will only apply to the additional tax owed due to your spouse’s failure to report income or a claim of improper deductions or credits.
Separation of Liability Relief
To qualify for separation of liability relief, you must meet one of the following requirements:
•You’re divorced or legally separated from the spouse with whom you filed the joint return
•You’re widowed, or
•You haven’t been a member of the same household as the spouse with whom you filed the joint return at any time during the 12-month period ending on the date you request relief
Even if you meet one of the above requirements, you will not be eligible for separation of liability relief if you had actual knowledge of the erroneous item that caused the understatement of tax liability on your joint return. Furthermore, separation of liability relief is only available for taxes due as a result of adjustments made by the IRS to your tax return. It does not apply to amounts shown to be due on your tax return when you filed it, but remain unpaid.
Separation of liability relief provides a separate allocation of additional tax for the erroneous item attributable to your spouse. You will be responsible for paying the amount allocated to you.
To qualify for equitable relief, you must establish that based on the facts and circumstances, it would be unfair to hold you liable for the understatement or underpayment of tax. You cannot receive equitable relief if you are eligible for either traditional innocent spouse relief or separation of liability relief.
There are other requirements for equitable relief, which are listed in IRS Publication 971. Some factors that the IRS will consider include economic hardships, whether you are separated from your former spouse, and whether your spouse or former spouse was abusive or controlled your financial matters. A tax attorney can help you determine which method of innocent spouse relief is applicable to your case.
See our Flowchart for more information on the qualifications for innocent spouse relief.