Money Matters: ‘Innocent Spouse Relief’ protection against tax fraud
This post is from our friends at Practical Money Skills and offers a great deal of information on Innocent Spousal Relief.
Saying “I do”
When you walk down the aisle for your fairytale wedding, brides and grooms vow “For Better or For Worse.” The “worse” presumably includes job loss, illness, but it is unlikely any one of those blissful brides or grooms imagine becoming the victim of tax fraud perpetrated by the person placing that shiny ring on their finger.
What does being married mean for your taxes?
Married couples often file joint tax returns because it allows for a number of tax credits and other benefits. However, filing jointly also means each of you is responsible, for any taxes, interest and penalties due on returns filed while you are married. So, if your spouse or now ex-spouse unintentionally or deliberately underreported income, overstated deductions, didn’t report taxable IRA distributions or any of a host of other infractions…. you could be responsible.
Innocent Spousal Relief
This is where “Innocent Spousal Relief” comes into play for tens of thousands of people each year. It can be difficult to prove your case. Many are denied. However, in at least one respect, the IRS eased the burden of proof on the spouse asking for relief. Last year, the agency eliminated the two-year requirement for taxpayers filing for “:equitable relief,”: a category open to taxpayers who don’t meet the strict requirements of other provisions in the Innocent Spouse law.
The IRS recognized the victimized spouse often is not aware of any tax transgression until long after the fact. In other words, the offending spouse concealed the information, failed to forward mailed underpayment notifications from the IRS – or, in the case of domestic abuse, the victim was afraid to come forward.
Three Types of Tax Relief
Here’s where you should pay close attention: There are THREE categories of relief you may seek: Innocent spouse relief; separation of liability and equitable relief. The differences between them (including eligibility, deadlines and statutes of limitations) are complicated, so read “:Tax Information for Innocent Spouses”: at www.irs.gov for details or consult with a tax professional.
IRS Form 8857
To apply for Innocent Spouse Relief, you’ll need to file IRS Form 8857; however, one form will work for multiple years’ filings. Don’t delay filing just because you don’t have all required supporting documentation, since in some cases the two-year filing deadline does still apply.
In making its ruling, the IRS will consider factors such as your educational and business experience, the couple’s financial situation and the extent of your participation in the action that resulted in the erroneous item. The IRS will deny a claim if they believe you benefitted from the tax avoidance.
Taxpayers whose past request for equitable relief was denied solely because of the two-year limit may reapply using IRS Form 8857 if the collection statute of limitations for the tax years involved has not expired.
Visit “:Tax Information for Innocent Spouses”: at www.irs.gov for details on the various types of relief available, eligibility qualifications, statutes of limitations and more.
- Tax Refund Fraud and What Can Be Done (getirshelp.com)
- Qualifying for Tax Relief as an Innocent Spouse as IRS Boost Collection Efforts (prweb.com)