Taking the fall for a spouse’s mistakes? Not so fast!
Innocent and Injured Spouse provisions are intended to address when it is unfair to hold a spouse responsible.
Do you have a spouse that understated a tax liability? Did you have no knowledge of what they did? Did you get ZERO benefits from what they did and now you are paying the price? You may be entitled to Innocent Spouse Relief.
Did you marry someone who already had a tax problem that you were no part of when you married them but now they IRS has taken your tax refund? You may be entitled to Injured Spouse relief.
There is often confusion about what constitutes Innocent Spouse and many taxpayers have no idea that Injured Spouse even exists. The two names actually refer to different situations but both are intended to correct the problem when it is unfair to hold a spouse responsible.
Innocent Spouse Relief
In the case of Innocent Spouse it is important to remember that when you file a joint income tax return, the law holds you and your spouse jointly and severally responsible for the entire tax liability. This means that the IRS can and typically will try to collect the tax from both of you. This holds true even if you separate or get a divorce and regardless of what your divorce decree says unless you qualify for Innocent Spouse.
So let’s discuss how Innocent Spouse works at a high level. At its most simplistic (though it is a bit more complicated in reality) if you have a spouse (or better yet an ex-spouse or spouse you are separated from) that understated a tax liability you may be entitled to Innocent Spouse Relief if you:
- had no knowledge of what they did and had no reason to know; and/or
- got ZERO benefits from what they did; and/or
- knew what they did but were abused or under financial control
There are other factors such as how compliant you have been on your returns, economic hardship, and your physical/mental health that are considered but the three listed above have the most impact on the outcome of Innocent Spouse relief. Also important to note is that the statute of limitations for making a claim for relief is typically two years after the date on which the IRS first attempted to collect the tax from you. Though some exceptions do apply.
Keep in mind that the IRS is required to inform the Non-Requestor (your spouse or ex-spouse) when you request Innocent Spouse Relief, even in the case of domestic abuse. This is to allow the Non-Requestor to participate in the process of determining who is liable for the tax. The IRS will send them a “Questionnaire for Non-Requesting Spouse” for them to complete.
Furthermore, if you are the Non-Requesting Spouse in an Innocent Spouse case you need to know that you have the right to file a protest, and you are entitled to an Appeals Conference. As a Non-Requesting Spouse, you cannot petition the Tax Court. However, in the event that the Requesting Spouse petitions the Tax Court then the Non-Requesting Spouse is allowed to “intervene” in order to become a party to the Tax Court proceedings.
CAUTION: Community property state rules are different and are not covered here.
Injured Spouse Relief
You may qualify for Injured Spouse Relief if you married someone who already had tax problems and now your share of your joint tax refund was or is expected to be, applied against your spouse’s past federal debts (including student loans), state taxes, or child or spousal support payments. If this is your story you may be entitled to Injured Spouse relief.
If you believe you qualify for Injured Spouse or Innocent Spouse Relief or if you received a Non-Requestor Questionnaire because your ex-spouse filed for Innocent Spouse Relief, you should contact IRS Hostage Negotiators for assistance.