Claiming innocent spouse relief

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Dear Tax Talk,
I have not worked in more than 10 years, and from 2003 to 2006, my husband filled out all the tax returns. I was never involved in filling them out, and he would just do them and ask me to sign them. I had no reason to think he was doing anything wrong. He attached a check to the returns and they were mailed in … so I thought. Well they were not mailed in until they had been altered. I did not know they were being altered until I got a letter from the IRS looking for us. He has changed our address on the returns to some address that I have never heard of.

Needless to say, the returns were not filled out correctly and he owed more than the amount that was sent in and also wrote a hot check to the IRS for one of the years. I am trying to see if I can get innocent spouse relief for those years. The amount is around $6,000 total that is owed. Do you think I have a chance? IF he changed the address, no telling what else he may have changed. Needless to say, we are divorced now over all this.
— Teresa

Dear Teresa,
When you file a joint income tax return, the law makes both you and your spouse responsible for the entire tax liability. In some cases, a spouse (or former spouse) will be relieved of the tax, interest and penalties on a joint tax return. Three types of relief are available to married persons who filed joint returns — innocent spouse relief, separation of liability relief and equitable relief.

You must meet all of the following conditions to qualify for innocent spouse relief:

Innocent spouse relief
  1. You filed a joint return.
  2. There is an understated tax on the return that is due to erroneous items of your former spouse.
  3. You can show that when you signed the joint return you did not know, and had no reason to know, that the understated tax existed (or the extent to which the understated tax existed).
  4. Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understated tax.

Erroneous items are underreported income or overstated deductions and credits. This requires that the additional tax the IRS is trying to collect from you came about from a subsequent change by the IRS. If the amount the IRS is trying to collect from you is from an original return balance due (an underpaid tax), then innocent spouse relief does not apply to you. Similarly, separation of liability only is available for an understated tax.

Equitable relief applies for an underpaid tax such as the hot check you mentioned. IRS Publication 971 discusses equitable relief and the conditions that must be met for it to apply. You should review this section prior to completing Form 8857 to request relief. You should file Form 8857 within two years of becoming aware of the unpaid taxes.

While it is best to always have a professional represent you, I recommend that you familiarize yourself with the law so that you can provide relevant information to the IRS. If you can’t afford a professional, then by all means you should still attempt the process.  The worst that can happen is that the IRS denies your claim and you’re still left owing what they’re trying to collect now.

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.