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What is Innocent Spouse Relief?

October 29, 2013

Taxpayers that are in tax debt can seek relief from the entire debt amount using IRS’ Innocent Spouse Relief, if they fulfill the qualifying factors. In cases where married taxpayers file jointly, both the partners are responsible for the tax debt even if one spouse earned all the income. If taxes are filed jointly, the IRS will take collection action against both the partners even if taxes were prepared by one.

Under Innocent Spouse Relief, a spouse can claim innocence or lack of knowledge of the tax debt and the circumstances that led to it. The spouse applying for the relief must fulfill the following conditions:

  • The joint return filed had an understatement of taxes the responsibility for which lies solely on the other spouse. Claiming false deductions and credits, and omitting income earned are some of the methods used for paying less taxes.
  • At the time of signing the tax return, you did not know, and had no reason to know, that there was an understatement of taxes
  • Considering that you had no knowledge of the understatement of taxes, and had no reason to know about it, it will be unfair to hold you responsible for the tax debt

If the applying spouse fulfills all these conditions, the IRS will provide complete relief from the tax debt, and will hold the other spouse responsible for the entire tax debt. Before applying for Innocent Spouse Relief, know that you can apply for the relief no later than two years from the date of the IRS’ first attempt to collect the tax debt from you.

Before 2011, Innocent Spouse Relief had strict qualifying factors that made it difficult for many taxpayers to make use of it to achieve relief. Now, the IRS has relaxed many of the limitations to assist taxpayers in receiving the benefits of the relief program. They include:

  • After the thorough review, the IRS might not apply the two-year time limit to requests if they see fit.
  • If a request for equitable relief was denied only due to the two-year limit, taxpayers can re-apply for the relief.
  • The IRS will not apply the two-year limit in any pending litigation that involves equitable relief. If the litigation is final, the IRS will suspend all collection action if they see fit.

Many of the applicants for Innocent Spouse Relief are women who find themselves under tax debt due to an erroneous filing by their spouses. With this IRS relief program, they can get full relief from tax debt, including relief from penalty and interest charged on tax debt.

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