Innocent Spouse Relief Overview
Nothing is worse than having your spouse die or facing a divorce. The next worse thing is learning that those back taxes are now your responsibility. Why you ask? A spouse’s responsibility for unpaid taxes depends on whether the tax return(s) at issue were filed as married filing separately, singly or jointly.
On the death of one spouse and the tax returns were filed jointly and there are unpaid taxes, the surviving spouse in most cases is held liable to pay them. The death of the spouse will not change or relieve the surviving spouse from being held personally liable for those unpaid taxes. Also, if you get divorced, the law still holds each spouse severally liable for the years where returns were filed jointly. However, it gets worse, if the tax payment is late or the return was filed late, the surviving spouses are also each liable for all interest and penalties associated with late filing and late payment of the back taxes.
If my spouse dies, am I held responsible for their unpaid taxes?
Since each spouse is held individually liable for taxes based on filing a joint return, the death of one spouse will not theoretically affect the surviving spouse’s liability for unpaid taxes. After the death, the deceased spouse’s executor is responsible for filing final tax returns, and the IRS may attempt to first satisfy any back taxes owed out of the deceased’s spouses’ estate. However, the surviving spouse will still be held liable for any remaining tax liability where the descendant’s estate is unable to satisfy the payment of the unpaid tax liability. Bear in mind, if a spouse dies owing taxes filed separately or singly, the surviving spouse would not be liable.
If I am getting divorced am I liable for my spouse’s unpaid taxes?
When two spouses are in the middle of a divorce that has not fully gone through, what then? How do you deal with unpaid taxes? One spouse may have limited or no knowledge at all of what the other is up to financially. Any mistakes made by the filing spouse, such as incorrect deductions, understatements of earnings, and more, can become a problem when the other spouse is held liable for them.
Since both parties aren’t legally divorced, they are jointly responsible for the tax liability. This complicates the divorce process because those liabilities may become a part of the settlement. However, if it can be proven that the filing spouse did this on purpose, then the other may qualify for “innocent spouse relief.” Further, any divorce decree or other legal binding agreement between the spouses absolving the other of responsibility for any unpaid taxes owed does not inhibit the rights of the IRS to collect the taxes in a joint filing from the other spouse.
What is Innocent Spouse Relief? And do I qualify?
The IRS offers something referred to as “innocent spouse relief.” For example, one spouse has incurred a huge tax liability – by failing to report income that the other spouse did not consent to or knows nothing about. This is available to a spouse who was not aware of the underreporting of income. To qualify for such relief numerous conditions must be met, including:
- You filed a joint tax return.
- When you signed the return, you weren’t aware of the mistakes made on it by your spouse.
- You were unaware at the time of underreported income or any deductions listed incorrectly.
- You had no reason to be suspicious of the tax return that you signed, nor did you ask about any of the questionable items listed on the return.
- The tax return in question had items that were listed quite differently than in previous years and is not indicative of a pattern.
If you meet all these conditions and the IRS agrees, then you qualify for “innocent spouse relief “and will not be held liable for the amounts due for the taxes which are owed. Even if you do not qualify for an entire release of tax liability, you may receive a partial release of liability. Either way, your spouse becomes the main individual liable for that liability.
The 3 Types of Innocent Spouse Relief
- Innocent Spouse as was already referenced.
- Separation of Liability Relief: To qualify for “separation of liability relief” a joint return must have been filed by the spouse and one of the following requirements must have been met at the time your requesting relief.
- You’re divorced or legally separated from the spouse
- You’re widowed
- From the date your requesting relief at any time 12 months prior to that date, you weren’t a member of the same household as the spouse with whom you filed the joint return.
- Equitable Relief: For those that are unable to qualify for innocent spouse relief or separation of liability relief they may still file for “equitable relief.” In order to qualify for equitable relief, it must be found that under all certainty of the situation including all circumstances, it would be an injustice to hold you liable for any deficit or underpayment of tax.
Innocent spouse relief or separation of liability must be requested no later than 2 years after the date which the IRS first set out to collect the tax from you. With regards to equitable relief it must be requested during the period of time the IRS can collect the tax from you. Lastly anytime a spouse is requesting innocent spouse relief the IRS will contact the other spouse.
Injured Spouse vs. Innocent Spouse
If you are unable to receive her/his share of a refund due to filing of a joint return, then there is still a possibility to recover one’s share of the refund. This comes up when the refund is applied to past due taxes or other debt owed by the other spouse. This is referred to as the injured spouse relief (which is not to be confused with the innocent spouse relief). This occurs when, after filing a joint return the social security number of the spouse responsible for the tax liability or debt obligation triggers an offset of the entire refund.
In such situation, you, as the injured spouse, may be able to get your share of the refund released to you. The injured spouse request is filed on Form 8379.
How do I request Innocent Spouse Relief from the IRS?
To request innocent spouse relief from the IRS, the taxpayer can prepare a written statement which should contain the same information and detail as that they would disclose in the form 8857 or the taxpayer needs to complete the IRS Form 8857 and mail it to one of the following addresses:
Internal Revenue Service
P.O. Box 120053
Covington, KY 41012
If using a private delivery service:
Internal Revenue Service
7940 Kentucky Drive, Stop 840F
Florence, KY 41042
Alternatively, you can fax the form and attachments to the IRS at 855-233-8558.
Innocent Spouse Tax Relief Consultation: 1-877-500-4930