DEFINITION of ‘IRS Innocent Spouse Relief Rule’
A measure of relief built into the tax code that allows a person, if eligible, to avoid paying his or her spouse’s tax if it was reported incorrectly. The IRS innocent spouse relief applies to a spouse that can prove that he or she did not incur the tax bill and did not somehow benefit from the failure to pay.
Ultimately, this rule is designed to protect people from liability for taxes incurred as a result of evasive or dishonest financial behavior by their spouses, or from divorces where one person fails to pay tax on the income he or she earned and intends to leave the other spouse with the bill.
BREAKING DOWN ‘Innocent-Spouse Rule’
Several conditions must be met in order for the innocent-spouse rule to apply. The innocent spouse must prove (with appropriate documentation) that the error or fraud was committed by the other spouse. The innocent spouse must also be able to establish that he or she didn’t know about the income or fraudulent activity. Finally, the application for relief must be made within two years of when the IRS begins its collection process.
Do I Qualify as an Innocent Spouse?
You may qualify as an Innocent Spouse if all of the following are true:
* You filed a joint tax return.
* Your spouse or former spouse improperly reported income on the joint return.
* When you signed the joint return, you did not know (and had no reason to know) that the return was incorrect.
* Due to the circumstances, it would be unfair to hold you liable for the unpaid taxes.
What Are Other Types of IRS Innocent Spouse Relief?
If you do not meet all of the requirements listed above for classic IRS Innocent Spouse Relief, you may still qualify for another type of tax relief for innocent spouses. When you prepare your tax return on GreenTree.Tax, we will determine which type of tax relief you qualify to claim on your tax return.
Read on to learn about the other types of Innocent Spouse Relief
Relief by Separation of Liability
You may qualify for Relief by Separation of Liability if you are divorced, separated, or widowed, and you did not live with your ex-spouse for at least 12 months before filing your request. In this case, the IRS will assign a certain amount of the tax liability to you, and a certain amount to your ex-spouse. You will only be responsible for your portion of the tax debt, along with a portion of the interest and penalties.
There are many circumstances which may disqualify you from classic Innocent Spouse Relief, but should not keep you from getting the tax relief you deserve. Examples include having had to file separately due to state community property laws, and having had knowledge of your spouse’s tax fraud–even if you were afraid to question your spouse about it due to fear of physical abuse. The IRS may grant you Equitable Relief in some of these situations.