Qualify for Innocent Spouse relief
Innocent Spouse Relief provides a lifeline for individuals who find themselves wronged by the actions or omissions of a spouse or former spouse.
When a joint tax return is filed, both spouses are generally held responsible for the tax and any interest or penalties due on the return, even if they later divorce. This is known as joint and several liability.
However, there are situations where it would be unfair to hold one spouse responsible for the debts of the other.
For example, if one spouse failed to report income, claimed improper deductions or credits, or misrepresented their financial situation in some other way, the other spouse may be eligible for spouse relief.
There are three types of relief from joint and several liability for spouses who filed joint returns:
- Innocent Spouse Relief: This provides relief from additional tax owed if your spouse or former spouse failed to report income, reported income improperly, or claimed improper deductions or credits.
- Separation of Liability Relief: This provides for the separate allocation of additional tax owed between you and your former spouse or your current spouse from whom you are separated when an item wasn’t reported properly on a joint return. The tax allocated to you is the amount for which you are responsible.
- Equitable Relief: This may apply when you do not qualify for innocent spouse relief or separation of liability relief for something not reported properly on a joint return and generally attributable to your spouse. You may also qualify for equitable relief if the amount of tax reported is correct on your joint return but the tax wasn’t paid with the return.
who qualifies for innocent spouse relief
To qualify for innocent spouse relief, you typically need to meet the following conditions:
- Joint Filing: You must have filed a joint tax return with your spouse.
- Underreporting or Erroneous Items: You should not have known or had reason to know about any understatement of tax on the joint return. This typically relates to unreported income or incorrect deductions.
- No Benefit: It must be unfair to hold you liable for the understatement of tax. This might be the case if you can demonstrate that you did not receive any benefit from the understatement.
- Timing: You generally need to request relief within two years from the date the IRS first attempted to collect the tax from you.
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innocent spouse form
You need to file Form 8857, Request for Innocent Spouse Relief, as soon as you become aware of a tax liability for which you believe only your spouse or former spouse should be held responsible.
The IRS will then review your application and make a determination.
Keep in mind that there are many factors that the IRS considers, and it's always advisable to consult with a tax professional or a tax attorney to understand your options and determine the best course of action for your specific situation.
Have you always relied on your spouse to prepare your tax returns? Have you received a letter from the IRS about back taxes due that surprised you? Were you aware of a windfall of income but your spouse didn’t tell you the correct amount?
If the answer to any of the above questions is yes, you may be able to get relief from the penalties and the taxes due by your spouse so that your credit is not ruined and you can get on with your financial life.
how does innocent spouse relief work
Here's how innocent spouse relief works:
- Eligibility Criteria: To qualify for relief, you must meet certain criteria, which include:
- You must have filed a joint tax return with your spouse.
- There must be an understatement of tax on the joint return, typically due to unreported income or incorrect deductions.
- You should not have known or had reason to know about the understatement of tax.
- It must be unfair to hold you liable for the understatement, often because you did not receive any benefit from it.
- You generally need to request relief within two years from the date the IRS first attempted to collect the tax from you.
- Filing the Request: To seek innocent spouse relief, you need to file Form 8857, "Request for Innocent Spouse Relief," with the IRS. This form requires you to provide detailed information about your tax situation and explain why you believe you should not be held responsible for the understatement.
- IRS Review: The IRS will review your request and consider the facts and circumstances of your case. They will assess whether you meet the eligibility criteria for relief.
- Possible Outcomes:
- If your request is approved, you will be relieved of the tax liability, penalties, and interest related to the understatement of tax.
- If your request is denied, you have the option to appeal the decision with the IRS.
- Consulting Tax Professionals: It's essential to consult with a tax professional, such as a tax attorney or CPA, when pursuing innocent spouse relief. They can help you prepare the necessary documentation, present a strong case, and navigate the process effectively.
- Statute of Limitations: It's crucial to keep in mind that there are time limits for requesting innocent spouse relief. Filing within the specified timeframe is essential to be considered for relief.
- Communication with Spouse: While not required, it may be helpful to communicate with your spouse about your intention to seek innocent spouse relief. Their cooperation or acknowledgment of the situation may affect the outcome.
Innocent spouse relief can provide significant relief for individuals who find themselves in a situation where they should not be held responsible for their spouse's tax liabilities. However, it's a complex process, and professional guidance is often recommended to ensure the best possible outcome.
Injured Spouses vs Innocent Spouse Relief
Sometimes life is full of surprises. You just got a letter from the IRS demanding additional taxes from your last year’s tax return.
You have always relied on your spouse to prepare your returns. After all, your spouse has an important job in finance.
Worst of all, you do not understand how the IRS thinks you did not report an additional $50,000 of income. Now the IRS wants $20,000 for back taxes, penalties, and interest.
In this situation and many others, you can apply for innocent or injured spouse relief. (Injured spouse means financially injured, not physically injured, in this case.)
First, you must meet certain conditions to qualify for this relief.
We can help you determine if innocent spouse relief will work for you.
We will review your situation to determine if there was an unreported income item that you didn't know existed.
Your spouse might have hidden additional income from you.
Or the situation just might not be fair to hold you responsible for the additional tax.
The IRS will review your application for innocent spouse relief and will determine if there were situations where:
- There was an erroneous deduction claimed by your spouse.
- You had no actual knowledge of the erroneous deduction or item when you signed the return.
- It would be unfair to hold you liable for the tax once the facts & circumstances are known.
- You have not transferred or received property from your spouse to avoid payment to a third party or to pay taxes.
We understand that is a difficult time for you. There are many things to consider.
We are here to help you determine if you meet the requirements for innocent spouse relief.
How We Can Help With Innocent Spouse Relief
If you feel you might be in a situation where the IRS is trying to collect money from you and it is your spouse that should have the debt, then we may be able to help.
Here are ways we can help an innocent spousal relief or injured spouse with tax debt:
- We can consult with you to assess your situation.
- We can explain the options you have for applying for tax relief.
- We can act as your representative to the IRS to handle your case.
- We can complete the forms necessary to apply for relief.
- We can access your IRS file to understand the records they have about your situation.
- We can negotiate your case with the IRS officer.
To get started with us, please contact us to arrange a convenient time to discuss your specific situation.
We will handle your situation in a discreet and confidential manner.
Your privacy is important to us.
WHAT IS INNOCENT SPOUSE RULE?
It is said, the IRS holds each spouse responsible to pay the tax. If no one pays the tax debt, the IRS proceeds to find after each of you individually for the entire tax debt.
It does not matter if you experience the middle of a divorce proceeding or are already divorced, you are still liable for the tax debt.
Does the IRS let you off the hook if a state court says you are not responsible for the tax debt? Unfortunately, no.
The IRS is federal jurisdiction. It ignores state proceedings when collecting or assessing federal income tax.
You must meet all of the following conditions and complete the innocent spouse form to qualify for innocent spouse relief.
You filed a joint return which has an understatement of tax due to erroneous items, defined below, of your spouse (or former spouse).
You establish that at the time you signed the joint return you did not know and had no reason to know, that there was an understatement of tax.
Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax.
You and your spouse (or former spouse) have not transferred the property to one another as part of a fraudulent scheme.
A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, ex-spouse, or business partner.
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