If You Are Not Eligible For Innocent Spouse Relief Try Separation Of Liability

Couples who file a joint tax return are jointly liable for any tax debt. However, the law provides a way for a spouse to be relieved of  a liability separate from his or her spouse. This includes innocent spuse relief, which can be availed by the spouse who did not commit the mistake or omission that led to the tax debt. Read on to know how you as the innocent spouse can avail of this recourse to reduce your tax liability. 

Criteria for Innocent Spuse Relief 

1. You filed a joint return containing an understatement of tax liability that can be attributed to your spouse's erroneous item. This could be any income received by the other spouse that was not reflected in the joint return and includes deductions, credits and even property that were incorrectly reported in the return.

2. At the time of the signing of the return, you had no knowledge and no reason to know that the return contained an understatement of any tax liability.

3. All the facts and circumstances would tell a reasonable person that you could not be fairly held liable for such understatement in the tax return.

File Form 8857 to ask for this relief. You can also include other documents that you would like the IRS to consider. It is important to note that you must meet all the conditions in order to qualify for innocent spouse relief.

This is usually the best option for you to be relieved of any liability from any understatement that is solely the mistake of the other spouse. However, if by any reason you still cannot qualify for  innocent spouse relief, you can also opt for Separation of Liability.

Separation of Liability

Separation of liability can be your recourse if: 

1. You are divorced or legally separated from the spouse with whom you filed a joint return

2. You are a widow

3. You have not been living in the same household as the other spouse  during the 12-month period that ended on the date when Form 8857 was filed.

To be eligible for this recourse, you only need to meet one of the conditions above. This will divide the understatement of tax including interest and penalties owed between you and the other spouse. The amount of understatement of tax attributed to you will be based on the income and deductions on your earnings and assets. This means that you may have a chance of a reduced tax debt if the other spouse earns more than you do. However, it is also important to note that you cannot qualify for this relief if you had actual knowledge of the item that  resulted to the understatement at the moment when you signed the tax return.

A tax attorney can help you determine whether you qualify for this  relief or not. He or she can also help you prepare all the paperwork you need so you can successfully avail of this remedy. Get in touch with us to see how we can help you.