The Innocent Spouse Rule applies to both married couples and those who are divorced. Couples who file a joint income tax return are responsible for any taxes owing on the return. The Rule is the only way that someone can avoid being held responsible for the amount owing to the Internal Revenue Service (IRS).
Joint and Several Liability
When a couple files a joint income tax return, both of them are responsible as a couple and individually for any taxes and penalties owed based on the information provided on the document. The fact that the couple may divorce after the return has been filed does not relieve them from this responsibility.
A divorce decree may state that one spouse is to pay any taxes due from previous years, but that doesn't relieve the other one from being responsible for paying the outstanding amount. The IRS may look to one spouse to pay the entire amount.
When the Innocent Spouse Rule is Used
The Innocent Spouse Rule can only be used in these circumstances:
- The amount of tax owing on the return was understated because the other spouse failed to report part of his or her income or claimed deductions he or she was not entitled to.
- The "innocent spouse" did not know this information at the time he or she signed the return.
- In the circumstances, holding the "innocent spouse" responsible for paying the taxes would be unfair.
- The "innocent spouse" files for this exemption with the IRS.
Making a Claim Under the Rule
If you receive a collection letter from the IRS and feel that you should be exempted under the Innocent Spouse Rule, you need to file a Form 8857, Request for Innocent Spouse Relief. You have two years from the date the IRS started collection proceedings against you.
Once the form has been submitted, all collection proceedings will stop until the matter has been resolved.
Collection Proceedings from the IRS
The following are considered "collection proceedings" by the IRS:
- A notice of intention to levy under section 6330 is received
- An income tax refund from another year is held to pay the taxes owing
- A lawsuit is started to collect the unpaid taxes owing from property the "innocent spouse" owns
After the Claim Has Been Filed
If you make a claim under the Innocent Spouse Rule, the IRS will inform your spouse or former spouse of this fact. There are no exceptions given, even in situations where the "innocent spouse" was the victim of domestic violence. You will need to consider the possible consequences of making a claim under the Rule before doing so.The non-filing spouse has the right to participate in the application to grant tax relief to the "innocent spouse." The process for resolving a claim can take up to four months. If the filing spouse is granted relief from having to pay taxes, the non-filing spouse has the right to appeal that decision.
Getting Help With a Claim
If you are interested in making a claim under the Innocent Spouse Rule, a tax lawyer can help prepare the necessary documentation. Another advantage to hiring an attorney is that once you turn the matter over to that person, all communication with the IRS will be handled through that individual. You no longer have to deal with it on your own. In a situation where your claim is denied and you are still considered responsible for unpaid taxes, the attorney can negotiate a settlement and/or a payment schedule with the IRS on your behalf.
You can find more information about the Innocent Spouse Rule on the IRS web site.