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Types of relief available for ‘innocent spouses’

On Behalf of | Feb 22, 2021 | Tax Law |

Tax season is stressful for many Washington D.C. residents, but can be even more stressful for couples going through a divorce. Couples whose divorces are not finalized on or before December 31 of the previous year may choose to file a joint tax return.

There are many divorce related tax disputes that may arise for wealthy couples. While there are benefits to filing a joint return, there is a potential downside, particularly if your former/current spouse underreported income or made other fraudulent claims on your joint return. Generally, the IRS may hold both you and your ex liable for mistakes made on the return, even if you were not personally at-fault.

Fortunately, the ‘innocent’ spouse can request relief so that you are not required to pay the tax, interest, and/or penalties associated with your spouse’s/ex-spouse’s errors. There are three main types of relief available:

  • Innocent spouse relief
  • Separation of liability
  • Equitable relief

According to the IRS, an innocent spouse must:

  • Have filed a joint return with an understatement of tax due to current/former spouse’s error
  • Not have known or had reason to know that there was an understatement of tax when they signed the joint return
  • Not have transferred property as part of a fraudulent scheme with current/former spouse

Additionally, the IRS must determine that holding the ‘innocent spouse’ responsible for their current/former spouse’s mistakes would be unfair.

For separation of liability, the IRS states you must be legally single (legally divorced, legally separated, or widowed and not have lived in the same house as your ex-spouse in the 12 months leading up to the date you file your request for relief

Finally, for equitable relief, the IRS must determine that holding you responsible for your spouse’s errors is unfair. You must also not qualify for innocent spouse or separation liability relief.

There are many complications that may arise during the relief claim filing process, particularly if your claim gets denied. An attorney specializing in divorce tax issues can assist you and help make sure you are not held responsible for your ex’s mistakes.