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'Innocent spouses' get protection
from ex-partner's tax liability
By Cora M. Barnhart •
Bankrate.com
Nearly 10 years after the divorce that ended
her marriage, the IRS dragged Elizabeth Cockrell down memory lane.
Their vehicle? A tax bill for $680,000.
The bill was the result of taxes underpaid during
her marriage. Her ex-husband had set up illegal tax shelters for
his investments. The IRS hunted down Cockrell because she had signed
joint returns while she was married.
Most married taxpayers file a joint tax return
because of certain benefits. What they tend to forget is that this
allows the IRS to hold both spouses responsible for any payments
due. It doesn't matter if one spouse earned all of the income.
This holds even if a divorce decree states that
your spouse will be responsible for any amounts due on previously
filed joint returns. In fact, in Cockrell's case, she had a signed
document from her husband stating his responsibility for the tax
shelters. But her signature on those joint returns made this document
ineffective. Her ongoing struggle to avoid her ex's tax liability
is detailed on her Web site, Women for
IRS Financial Equality (WIFE).
Relief
at last
There was some modest protection for "innocent spouses"
under the law, but with the IRS under fire for squeezing penniless
single mothers, that protection was broadened as part of the Taxpayer
Relief Act of 1998. A new category was created: "injured spouses."
These are people who filed a joint federal income tax return with
a spouse, only to see the refund seized by the IRS because the spouse
(or ex-spouse) evaded
- Child support payments
- Federal tax, or
- Federal non-tax debt, such as student loans.
The IRS has chosen to educate potential injured
spouses even more. The agency added an interactive "Spousal
Tax Relief Eligibility Explorer" to its Web site. It leads
the reader through several questions, including:
- Did you personally receive income that was
reported on your jointly filed federal income tax return(s) in
question?
- Were income taxes withheld on your personal
income items, reported on your jointly filed Federal income tax
return, and/or did you make estimated tax payments to the IRS
regarding this income?
- Was the refund taken to pay your spouse's
or former spouse's past due obligation(s), for which you are not
liable?
Answering "yes" to all three questions
is the first step to qualifying for tax relief as an injured spouse.
To complete this process, you must file Form
8379.
In addition, the forms are available by calling
1-800-TAX-FORM (1-800-829-3676). If you have other questions, the
IRS Web site also provides a Q&A
about innocent and injured spouse protections.
-- Posted Jan. 26,
2000
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