The IRS Innocent Spouse Rule

Do you pay taxes in California? Are you married? If you answered yes to both of these questions, you need to keep reading. Because, under California state law, if your spouse owes taxes to the IRS and you don’t know about it, you could be held liable for those taxes.

What seems to only happen in our favorite dramas is actually a dark reality. But there’s a way to protect yourself from this – innocent spouse relief.

What is Innocent Spouse Relief?

Most people are familiar with the phrase ” innocent until proven guilty.” However, when it comes to taxes, the IRS presumes that you are guilty of any errors on your return unless you can prove otherwise. This can be a scary feeling, especially if you are innocent of any wrongdoing on a joint tax return.

Fortunately, innocent spouse relief is available for those who have been unfairly burdened with tax liability due to their spouse’s actions.

It allows an innocent spouse to prove their innocence in the event that their significant other incorrectly reported or hid unreported income.

Are you liable for your spouse’s IRS debt?

If you filed a joint tax return while married, the other spouse must pay the IRS tax. This means both of them could collect 100% debts from each spouse. It’s the same after divorce, even if the husband required by a divorce decree doesn’t make the money paid.

Who is eligible for Innocent Spouse Relief?

In order to qualify for innocent spouse relief, taxpayers must meet certain criteria.

Is it difficult to qualify for innocent spouse relief?

The harsh reality is that the IRS receives over 50,000 forms requesting innocent spouse relief, but doesn’t even accept half.

First off, you must have filed a joint return that is incorrect – it could be an understatement of tax or several erroneous items on the tax return.

When considering innocent spouse relief, the IRS will look at all the facts and circumstances of your case, including whether:

• You filed a joint tax return;
• You currently live in the same household;
• You benefited from the unpaid tax;
• You received disproportionately large tax refunds in prior years; or
• Separation proceedings have begun.

Other rules include:

Actual knowledge

The factual knowing test is governed by the principle that the IRS can’t consider an innocent spouse unless he or she knew about the deductibility when filing the return. This knowledge would make you complicit in tax understatements. The government lowered reliance on the fact to provide proof if there is reason why someone has had faulty knowledge in establishing this fact.

Reason to know

Did you have reason to know about the erroneous items at the time of filing your joint return?

If you did, we’re sorry to tell you that the IRS does not care and will still hold you liable for the taxes owed.

What is an innocent spouse form?

If you think you have a case, you can file form 8857 with the IRS, the Request for innocent spouse relief.

How Long does it take the IRS to process an innocent spouse form?

The innocent spouse relief form is used to request relief from liability for taxes, interest, and penalties. After you request innocent spouse relief, it may take up to 6 months before a determination is made.

If the innocent spouse relief form is approved, the innocent spouse will not be responsible for any taxes, interest, or penalties that were incurred before the approval date.

The innocent spouse may also be entitled to a refund of any taxes that were paid after the approval date. If you are facing tax liability for which you are not responsible, you should consider filing an innocent spouse relief form. The process may take some time, but it could save you a lot of money in the long run.

I already filed a form that was denied but have new additional evidence. Can I file again?

The good news is if you feel like justice was not served to your spouse, or former spouse, you have a chance to prove your innocence a second time. The only downside is that you will not have tax court rights on the reconsideration.

If you think you might be eligible for innocent spouse relief, you should contact the IRS as soon as possible. innocent spouse relief may only be granted if you request it within two years from the date the IRS first began trying to collect the tax from you. For more information on innocent spouse relief, get in contact with us at Elite Tax Resolutions.