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If you didn’t know that your spouse received income, deducted the wrong amount, or didn’t even pay the taxes, it can be financially terrifying, particularly if you made federal taxes together.

There are taxpayers who think that the IRS won’t look at them if their spouse was the one who created the issue. Unfortunately, joint tax returns typically result in joint and several liability, meaning that the IRS may try to collect the entire tax, penalties, and interest from either spouse. This can be the case even following divorce, if it is expressly stated in a divorce agreement.

Fortunately, federal tax law offers a number of ways for those who have specific requirements to get some relief from taxation from their spouse.

There are a number of ways of creating a tax problem. For instance, your spouse can:

• Underreport freelance, business, investment, or employment income.
• Claim tax deductions or tax credits for things you didn’t actually deduct or credit.
• Oversize or underestimate assets or bases.
• File an incorrect business return.
• Properly report the tax but fail to pay the balance.
• Withhold financial information before or after the joint return is filed.

Understated tax and unpaid tax are important terms to understand, as they can have different tax relief options.

Joint return, you normally assume joint and several liability. That would eliminate the need for the IRS to apportion the bill among those who receive the income.

If, for instance, a couple files jointly and claims $80,000 of income, that income will be divided by two. For instance, if a couple files jointly and reports $80,000 of income, this income will be split in half. Subsequently, the IRS finds that the husband did not report any of his business income, which is $50,000. The extra tax may be taken off either husband or wife, even if the wife did not know of the business income.

This responsibility does not cease because of divorce.

If you satisfy the IRS requirements, Innocent Spouse Relief may help you not be liable for any tax due to the mistake of your spouse on these items.

In general, the victim needs to:

1. File a joint return.
2. A mistake in the reporting of tax due to wrong items that were due to your spouse.
3. Have no actual knowledge or reason to know about the understatement when you signed the return.
4. Factors that demonstrate that it would be unfair to hold you accountable.

Some examples of false items are unreported income, false deductions, overstated or understated asset values, and incorrect credits.

The IRS considers the facts and circumstances, not what a taxpayer says he or she didn’t know.

Knowledge doesn’t necessarily end the discussion in every situation, but it can make innocent spouse relief much harder to obtain.

The IRS will look at whether you did in fact know about the item, or whether a reasonable person in similar circumstances would have known. Factors may involve knowledge about finances, engagement with household finances, involvement in the income-generating business, and the type of information available.

When you are aware of only part of an incorrect item, and not the complete content, you may be given partial relief at times.

Legally separated, divorced, widowed, or lived apart for a required period may be eligible for separation of liability relief.

This method might have the advantage of having an indirect tax split between the spouses, instead of the assumption that they both must pay it.

There are, however, special rules and exceptions. If someone knows about a mistake in the tax, he or she may have restricted relief for that part of the tax.

But what if your spouse reported the tax and did the right thing, but failed to pay it?

The “old school” innocent spouse doctrine is limited to “straight tax” that was misreported due to “straight error.” When it would be unfair to hold you responsible, equitable relief may be available to address some of your unpaid or understated tax liabilities.

The IRS takes into account the whole scenario, such as:

• If you got a big tax advantage from the unpaid tax.
• If you made a good faith effort to pay taxes.
• What the impact of financial or physical hardship would be.
• If anything hampered your efforts to contest the tax situation, whether it was abuse or financial control.
• If you knew or had reason to believe of the understatement or unpaid tax.

Equitable relief can therefore be particularly important when the facts don’t fit neatly into the traditional innocent-spouse rules.

If a taxpayer is a victim of domestic abuse or financial control, he or she may have other considerations.

The IRS understands that a person might have signed a return or not contest an incorrect item out of fear of being retaliated against or as a result of being abused. This may impact the IRS’s evaluation of knowledge and fairness in some cases.

When it comes to communicating with the IRS, think carefully before going into “he says/she says” if there is any abuse or coercion.

The main document used to apply for Innocent Spouse, Separation of Liability, or Equitable Relief is Form 8857: Request for Innocent Spouse Relief. The form can usually be used to outline the situation, and it’s the IRS that decides which relief, if any, is applicable.

When formulating the request, include detailed supporting information and not just the fact that you were not aware of your spouse’s actions.

Relevant documentation can comprise:

1. Copies of pertinent tax returns.
2. IRS notices.
3. Bank statements.
4. Pay stubs and Forms W-2 or 1099.
5. Business records.
6. Demonstrated financial accountability.
7. Communication with regard to the tax return.
8. Documents demonstrating financial hardship or abuse, when relevant.

Be truthful and thorough. The factual explanation may be very crucial.

These two terms seem similar, but they are related to different tax scenarios.

Innocent spouse relief deals with cases concerning liability for tax, interest, or penalties on a joint return.

Injured spouse relief, on the other hand, is related to a legally binding debt that comes from a spouse’s past-due child support or taxes. An injured spouse claim, formally known as IRS Form 8379, is used to reclaim one’s share of the joint refund. For instance, an innocent spouse who is entitled to her part of the income can use injured spouse allocation when her share is withheld to pay for the legally binding debt of her spouse.

An innocent spouse who didn’t know or have reason to know about an error or omission on a joint return has a right to innocent spouse relief according to the IRS. If the taxpayer did not consent to file jointly, as the IRS states, they are claiming a non-consenting spouse’s position. In other words, the taxpayer who did not give consent to the joint return might have a different explanation than an innocent spouse.

One of the most common examples is a spouse who has agreed to file jointly without knowing about the errors on the joint return. The IRS provides that a taxpayer who did not agree to file jointly must contact the IRS to challenge the joint election on the return. By default, a taxpayer who did not agree to a joint return cannot rely solely on the innocent spouse position.

The IRS will conduct a case analysis and might ask for additional documents to confirm the initial information provided. The IRS will also contact the spouse or ex-spouse directly with further instructions or request information. It is important that the taxpayer responds to the IRS’s requests for information about their spouse’s or ex-spouse’s finances. However, there are specific procedures the IRS must follow when they are dealing with situations of fraud and abuse. They must notify the other spouse or ex-spouse about this matter.

According to the IRS, it can take up to six months or more for the case analysis to be completed. Until the request has been fulfilled, taxpayers must comply with the current law, including paying taxes for the current year.

If the IRS grants a preliminary determination, the IRS will notify both the innocent spouse and the delinquent spouse. Taxpayers who received a tentative determination can request further review or appeal.

An innocent spouse can contact the Taxpayer Advocate Service and seek professional assistance if the innocent spouse relief has been denied. When a final determination is issued by the IRS, a taxpayer has the right to go to the Tax Court, provided they are aware of the time limits that apply.

Timing is of the essence when it comes to innocent spouse relief.

According to the IRS, a taxpayer can request innocent spouse relief within two years from the date they received the notice of the IRS collection or examination. When it comes to other types of relief, each one has different deadlines. Equitable relief, for instance, has different timing requirements for taxpayers who want to claim a balance due from their spouse or a refund or credit. The IRS also has different rules when it comes to filing a claim for innocent spouse relief.

In other words, a taxpayer who wants to rely on one of the innocent spouse relief rules must be aware of the time limits. That is why it is essential that taxpayers do not wait for the IRS to start aggressive collection procedures before they request innocent spouse relief.

Here are some things to keep in mind if you have discovered that your spouse created an IRS liability:

1. Carefully Read All Notices Related to The Tax Debt

Make sure you understand what is being said, including what year the tax debt applies to, how much money the IRS wants you to pay back, what the nature of the tax debt is, and what actions, if any, are needed by a specific deadline.

2. Get All Documents Concerning the Tax Debt

Review the tax returns that apply to the liability. Compare the figures on the tax returns to your own estimated income and expenses to see if anything seems wrong.

3. Find Out If the Issue Concerns A Tax Underpayment or An Understatement of Tax

This distinction is important because it can determine what kind of relief, if any, is available when it comes to tax liabilities.

4. Keep All Documents Concerning the Financial Aspects of The Dispute

Don’t delete any emails, financial documents, invoices, tax filings, and any other documents that relate to the dispute. In other words, make sure to retain all records.

5. Don’t Automatically Agree to Pay the Entire Amount Owed to The IRS

Although you may think you are supposed to pay the whole amount, this is not always the case.

6. Consider Filing The Form 8857 When Appropriate

A taxpayer can use Form 8857 to formally request innocent spouse relief when the taxpayer filed a joint return for a specific tax year.

7. Hire A Professional

To help you navigate the complexities of the tax system if you are dealing with circumstances pertaining to the IRS collecting past-due taxes, significant unreported business income, fraud, or penalties.

If you remain married and file a joint tax return, it is a good idea to be more mindful of your spouse’s financial responsibilities. It is crucial that before filing jointly, you check the income statements and ask questions about any business expenses that seem odd to you. In addition, make sure you keep a copy of all jointly prepared returns and other tax documents, such as schedules, and review the estimated tax payments.

Filing jointly offers many benefits, but it also requires taxpayers to share responsibility for all tax-related matters.

Discovering that your spouse created an unexpected IRS tax liability is not ideal, but it does not necessarily mean you are completely at fault. Innocent spouse relief, separation of liability, and equitable relief can be available to taxpayers who meet the necessary conditions. The main thing is to understand which type of relief applies to your situation.

It is also crucial that you provide documentation for the things you claim to the IRS, respond to your notices in a timely manner, and take appropriate action based on the type of relief you have claimed. If you are facing a large liability on a joint return, in particular, a large business income or fraud, the expert can assist you in protecting your rights during the dispute with the IRS.

Generally, yes. Filing a joint return creates joint and several liability, meaning the IRS can go after either spouse for the full amount of tax, penalties, and interest due. However, innocent spouse relief, separation of liability, or equitable relief may be available to you in certain situations.

You can request innocent spouse relief by filing IRS Form 8857, Request for Innocent Spouse Relief. You must attach an explanation of why you weren’t aware of or didn’t have reason to know about the tax underpayment and why it’s unfair to you, if the IRS grants your request.

No. Divorce generally does not relieve either spouse of the joint and several liability for federal income taxes. However, a taxpayer whose filing status is divorced or legally separated may be able to claim separation of liability or other relief if he or she qualifies under the requirements set forth by the IRS.