When you marry your spouse, you do so for better or worse, and this often includes taxes. Those who file jointly are equally responsible for paying any balances owed. Even if you’re no longer with your partner (separated or divorced), the IRS can still require you to pay. And, if you don’t settle your back taxes, you could face wage garnishment, tax liens, and other collection actions. Thankfully, the IRS does offer a way out. It’s called innocent spouse relief. Here’s a look at what it is, how it works, and who is eligible to receive it.
What is Innocent Spouse Relief?
Innocent spouse relief essentially gets taxpayers off the hook (partially or fully) for taxes, interest, and penalties due to their spouse’s mistake. This includes, but is not limited to, incorrectly reporting income, taking tax credits or deductions erroneously, or even improper valuation of assets.
Who Is Eligible For Innocent Spouse Relief
As you can imagine, the IRS doesn’t give anyone a reprieve from paying tax debt without jumping through a few hoops first. You must meet certain requirements before they’ll even consider your request.
- You filed a joint return with your spouse.
- Your taxes were understated due to errors made by your spouse or ex-spouse.
- You didn’t know about the errors and can provide proof of your innocence.
If you live in a community property state and did not file a joint tax return, you may still be eligible to request innocent spouse relief if it pertains to an item of community income.
You’re ineligible to apply for innocent spouse relief in any year when:
- You signed an Offer in Compromise with the IRS,
- A closing agreement for the same taxes was signed,
- You were denied relief due to a final decision by a court, or
- You participated in a related court proceeding and did not request relief.
How to Request Relief
If you meet the eligibility criteria, the next step is to apply using Form 8857, Request for Innocent Spouse Relief as soon as possible. This six-page application requires you to provide information about your spouse or ex-spouse, as well as your involvement in filing your joint return. You will also have to provide details about your current financial situation. If you are a victim of domestic violence or spousal abuse, you’ll need to complete part V of the form, as well. Generally, you must file Form 8857 no later than two years after the IRS first attempts to collect taxes, however, there are some exceptions to this rule.
Types of Innocent Spouse Relief Available
When you submit Form 8857, you’ll automatically be considered for three types of spousal relief.
- Innocent Spouse Relief. Relief from paying additional taxes due on your spouse’s income from employment or self-employment because of errors made at filing. You must be unaware of these errors. You cannot claim relief on taxes due on your own income, household employment taxes, business taxes, or certain other taxes and payments.
- Separation of Liability Relief. This allows you to pay only your share of taxes due if you’re divorced, separated, or no longer living with your spouse. It’s generally considered if the understatement of taxes resulted from an audit or other inquiry, such as IRS Notice CP2000.
- Equitable Relief. If you don’t qualify for regular innocent spouse relief or separation of liability relief, you may be relieved of your tax liability if it would be unfair to hold you responsible based on all the evidence provided. This may be used in situations of spousal abuse or serious health/mental issues.
There’s no way to indicate which you prefer. The IRS will consider all evidence and determine which best fits your situation.
Where to Send Form 8857
Do not file Form 8857 with your tax return or send it to the Tax Court. It must be mailed to one of the following addresses.
By postal service:
Internal Revenue Service
P.O. Box 120053
Covington, KY 41012
By private delivery service:
Internal Revenue Service
7940 Kentucky Drive, Stop 840F
Florence, KY 41042
You may also fax the completed form and all attachments to 855-233-8558.
IRS Innocent Spouse Relief Review Process
Once the IRS receives your request for innocent spouse relief, it will launch its investigation. By law, it’s required to contact your spouse or former spouse, and allow them to participate in the process. There are no exceptions, even if you are a victim of domestic violence or spousal abuse.
The IRS, however, will not disclose your personal information. This includes your address and phone number, as well as any information about your employment. Other information, such as statements or evidence about your involvement in preparing the return in question, will be shared. If you have concerns about your privacy, be sure to redact or black out personal information in the material you submit.
IRS Collections Temporarily Suspended
During the review process, the IRS cannot attempt to collect the debt in question while your request is pending. Interest and penalties, however, will continue to accrue. Once your case is resolved, including any appeals, collections will resume. The statute of limitations for collection of the debt will also be increased by the amount of time your request was pending plus 60 days.
Decision Time Frame
The IRS may take up to six (6) months or longer to review your request and make a decision. You and your spouse (or ex-spouse) will receive a preliminary determination letter once all materials are reviewed. If neither of you appeals the decision, a final determination letter will be sent to both of you. Should either of you appeal, the IRS Independent Office of Appeals will review and issue a final determination letter.
You may also petition the Tax Court to review your relief request if:
- The IRS sends you a final determination letter, or
- You didn’t receive a final determination letter from the IRS within six (6) months of filing Form 8857.
The Tax Court petition must be filed no later than the 90th day after the date the IRS mailed your final determination letter.
Where to Get Help
If you recently received a notice that you owe tax on a joint return, be sure to follow the instructions and pay attention to deadlines. You’ll also want to request innocent spouse relief as soon as possible. The information and evidence you provide in Form 8857 are crucial for getting your request approved. Although you can handle this on your own, we strongly encourage you to consult with a tax professional before moving forward. Less than 20% of innocent spouse relief requests are successful. Working with a tax expert may improve your chances for approval. For a free consultation, call Tax Defense Network at 855-476-6920.