Filing a joint income tax return makes both parties equally responsible for any tax liability in the eyes of the Internal Revenue Service (IRS). This equal responsibility is known as joint and several liability. Under the IRS rules, married couples filing jointly are responsible for the accuracy of the tax return and any and all additional tax liability that the IRS determines may be owed. This may also apply to couples who reside in community property states. If a tax penalty later applies because of an inaccurate tax form, regardless of the marital status at the time of IRS audit, both parties are still equally responsible for any penalties, tax and interest associated with the audit.
To be considered eligible for innocent spouse relief if you meet a few conditions that verify to the IRS that you either did not know of the circumstances that resulted in tax penalties, or should be exempt from the responsibilities regardless of your marital status at the time the tax return was filed. The innocent spouse must prove that they cannot be held responsible for the payment to the IRS. The couple may have split up, divorced or one spouse was not involved with the finances in the relationship. The IRS will determine the final outcome of the application based on the information provided by the innocent spouse.
Types of Innocent Spouse Relief
The IRS offers three types of relief for tax interest and penalties in the case of joint tax filers who have been determined to owe money to the IRS.
One of the three options for relief must be applied for and granted by the IRS. You will have to research the IRS regulations to see which type of relief you are eligible for based on your circumstances. Any individuals who apply for any of the three types of relief will have had to file a joint tax return with the IRS. It is possible that one spouse claiming to be the innocent spouse will be relieved of some or all of the taxes, interest or penalties associated with the joint tax return in question. There are also relief options that are available to married couples who did not file jointly or those residing in states that are considered community property law states.
The Criteria to Qualify for Innocent Spouse Relief
The IRS has determined that you must meet the following conditions to apply and quality for innocent spouse relief.
- Filed a joint return.
- Have a tax return that has understated tax for erroneous items by your spouse or former spouse.
- The evidence proves that you had no knowledge or understanding of the inaccuracy of the information on the tax return at the time that you signed the form.
Changes to the Tax Law
The IRS recently sought to institute a time limit for filing for relief under the Innocent Spouse law. Prior to this change in regulation there was no statue of limitations on filing for tax relief. The Seventh Circuit Court of Appeals ruled in favor of the request of the IRS to impose a reasonable time limit for which to file for Innocent Spouse Relief. It has been determined that individuals who seek relief must apply for this is now two years from the time that the IRS first attempted to collect the taxes.
Although the new tax law was victories in the Seventh Circuit only, it appears that this change should be considered law for all taxpayers regardless of the circuit that they reside. The IRS plans to attempt to fight to have this new time frame imposed in all areas.