Many married taxpayers opt to file jointly because of the many benefits this filing status offers them. However, filing jointly also makes both spouses jointly and severally liable for any tax, interest and penalties. This is true even after the spouses divorce. Unfortunately, problems can arise when a spouse fails to report income or takes improper deductions or credits on the tax return (or fails to file a return at all), as the other spouse remains liable. Fortunately, there are a few ways that persons who were unaware of their spouse’s illicit tax activities can relieve themselves of liability.
Innocent spouse relief relieves you of joint and several liability from the tax you owe if your spouse (or former spouse) did not report income, improperly reported income or improperly claimed credits or deductions. Under the tax laws, all of the following must be true to qualify for this type of relief:
· You filed a joint return with a tax deficiency that is solely attributable to your spouse’s erroneous item (e.g. credits, deductions, etc.)
· At the time you signed the return, you did not know or have reason to know that there was an understatement of tax
· Considering the facts and circumstances, it would be unfair to hold you liable for the tax deficiency
Separation of liability
Separation of liability relief allocates the owed tax between you and your spouse or former spouse, lessening the amount for which you are liable. It is available if at least one of the following is true:
· You are widowed
· You are divorced or legally separated from the spouse with whom you filed the joint return
· You have not been a member of the same household as the spouse with whom you filed the joint return at any time during the year before you sought relief
If you do not qualify for innocent spouse or separation of liability relief, equitable relief may be available. To qualify for this type of relief, you must prove that, under all the facts and circumstances, it would be unfair to hold you liable for the underpayment or understatement of tax. In addition to this, you must meet other requirements listed in Publication 971 to qualify for equitable relief.
Consult an attorney
Successfully obtaining relief from joint and several liability for taxes can be an uphill battle. To maximize your chances of success, it is vital to have the advice of an experienced tax attorney throughout the process.