The Requirements for Equitable Relief as an Innocent Spouse

The Requirements for Equitable Relief as an Innocent Spouse

Equitable relief is one of three forms of innocent spouse relief available to married, or formerly married, taxpayers. Taxpayers who filed joint returns are generally jointly and severally liable for the full amount of any tax due, but innocent spouse relief allows an escape from this liability. Unlike the other two forms of relief, equitable relief is available for amounts reported on a tax return but not paid, in addition to amounts attributable to items that were not reported on your tax return.

Generally, the following requirements must be met in order to qualify for equitable innocent spouse relief:

  1. You are not eligible for either of the other two types of innocent spouse relief.
  2. You filed a joint return for the tax years at issue.
  3. You timely filed your claim for relief using form 8857. For relief from a balance due to the IRS, you must file for relief within the time period the IRS has to collect the tax, usually 10 years. If you are seeking a credit or refund, you may have as little as two years from the date of your payment to file the claim for relief.
  4. You and your spouse cannot have transferred assets to each other as part of a fraudulent scheme.
  5. Your spouse cannot have transferred property to you for the main purpose of avoiding tax or the payment of tax.
  6. You did not knowingly participate in the filing of the fraudulent return.
  7. The income tax liability you seek relief from is attributable, in full or in part, to an item of the your spouse. If the item is only partially attributable to your  spouse, you can only seek relief from the portion that is not attributable to you.

If you meet all of these threshold conditions, the IRS will grant you relief if you establish that it would be unfair to hold you liable for the unpaid or understated tax. How does the IRS decide whether it is unfair to hold you liable for the tax? All of the facts and circumstances of your case will be evaluated, with the relative weight of each factor varying depending on your circumstances.

In particular, the IRS will look at your current marital status, economic hardship, knowledge or reason to know of the item causing understated tax, the legal obligation of your spouse to pay the tax under a divorce decree or other agreement, whether you significantly benefited from the unpaid or understated tax, whether you have made a good-faith effort to comply with tax laws, and your physical and mental health. A tax litigation attorney will have the skills necessary to make the best presentation of your case to the IRS

Abuse or financial control by your spouse may impact how the IRS evaluates these factors. If you have questions about whether you qualify for equitable relief as an innocent spouse, consult with a tax attorney, and see our innocent spouse relief flowchart.

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