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Innocent Spouse Relief, Separation of Liabilities & Equitable Relief

The IRS and state taxing authorities hold married taxpayers jointly and severally responsible for the tax balances due on a joint tax return, even if they later divorce. This is true even if the divorce decree states otherwise.

Programs have been developed to free one spouse from liability in cases where it would be unjust to hold them responsible for tax debts that truly belong to the other spouse. For the IRS, the available relief falls into three program classifications, all of which are similar to one another, but slightly different. The three relief programs are innocent spouse relief, separation of liabilities and equitable relief, as shown below.

IRS publications state that to qualify for innocent spouse relief, a taxpayer must meet all the following conditions:

  • the jointly filed return must have understated the actual tax balance that was really owed;
  • the understated amounts must be due to erroneous items of the spouse and not of one's own;
  • it must be established that at the time the joint return was signed, the taxpayer 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 the taxpayer liable for the understatement of tax; and
  • the relief is requested within 2 years after the date on which the IRS first began collection activity against the taxpayer on the underreported tax amounts.

IRS publications state that if a taxpayer is only partly responsible for the additional tax assessments resulting from the understatement of an originally filed joint return with understated tax, then that taxpayer may qualify for separation of liabilities if:

  • they are no longer married to, or are legally separated from the spouse with whom they filed a joint return; or
  • they were not a member of the same household as the spouse you signed a joint return with during the 12 month period ending on the date the form 8857 is filed.

In the event that a taxpayer is deemed not to qualify for either innocent spouse relief or separation of liabilities, relief might still be available through the equitable relief program. This program gives the IRS a great deal of flexibility in determining if a spouse should be relieved of liability. If the IRS can be convinced that one spouse was unaware of or not at fault for the creation of a tax liability, then it is common for that spouse to be entirely relieved of existing liabilities.

Some of the state taxing authorities offer similar forms of relief while others don't. We will consider alternatives offered by a taxpayer's specific state as an option for resolving their state tax problems as their case is worked.

If you believe that you may be a good candidate for innocent spouse relief, separation of liabilities or equitable relief, contact our office to discuss these programs and to start the process of applying.

Injured Spouse Relief
Situations arise where one taxpayer in a marriage is liable for taxes that the other is not. Sometimes the taxing authorities are overzealous to collect the back taxes and mistakenly enforce collections against the non-liable spouse in the marriage. This is an inappropriate collection action that can generally be corrected. We assist taxpayers that have been wrongfully collected from in pursuing reimbursement of these types of tax payments.

If you believe that the federal or state taxing authorities have taken your funds and applied them to the balances owed by your spouse, contact our office to discuss what can be done to help you recover your funds.

"My former spouse had his own business. While we were married, we had filed “married filing joint” tax returns. After the returns were filed, the IRS audited his business and made changes to our joint tax returns, thus making me liable. Burkhart, Peterson & Company represented me before the IRS. They filed a Request for Innocent Spouse Relief and their subsequent negotiations resulted in the IRS forgiving the taxes against me and agreeing to only pursue my former spouse for the additional tax assessments."
Sheilah B.
Lawrence, KS