Innocent spouse relief is an IRS mechanism that permits persons to avoid paying more tax, interest, and penalties if their spouse or ex-spouse failed to declare income, reported income wrongly, or claimed tax deductions or the credits incorrectly. Innocent spouse relief differs from the injured spouse relief. By obtaining innocent spouse relief, you can avoid paying tax, interest, and penalties if your spouse (or ex spouse) incorrectly reported or omitted items on your tax return. In rare situations, a spouse may be exempt from paying taxes, interest, and penalties on a joint tax return.
It is not easy to obtain innocent spouse relief. The IRS has the authority to decline your request, and the procedure can take up to six months. The IRS Publication 971 has all of the facts, but here are five key rules to consider when applying for innocent spouse relief.
- You must file your taxes together.
- The mistake must be due to the other individual.
- You must demonstrate your innocence.
- The situation must be persuasive.
- In general, you must apply for innocent spouse relief no later than two years after the IRS began attempting to collect the tax from you. (A few exceptions exist.)
Innocent spouse relief is available to taxpayers who filed a combined tax return (the married filing jointly tax status). If income is missing from your tax return, it should be income received by your spouse, not you. You must be able to demonstrate that when you signed the tax return, you were unaware and had no cause to suspect that you were understating your tax liability.
The IRS considers everything from the nature of the error to your financial condition, educational history, involvement in the activity that caused the problem, if the issue is part of a trend, and other criteria. When deciding whether to provide innocent spouse relief, the IRS also considers fairness. It considers everything from whether you benefited from the tax mistake to your marital status and even whether your spouse has abandoned you.