When it comes to filing taxes, married couples can be held responsible for the accuracy and completeness of their joint income tax filing. But what happens when one spouse was unaware of or underreported income or deductions? This is where the Innocent Spouse Rule comes into play.
What Is the Innocent Spouse Rule?
The Innocent Spouse Rule is a legal provision that allows a married taxpayer to be excused from responsibility for certain portions of their joint tax bill. The rule requires that the taxpayer has not actively participated in the misdeclaration or underpayment of taxes, making them essentially ‘innocent’ of the consequences, allowing them to request that amount due on a joint return be allocated to the spouse who is primarily responsible. The spouse who files for Innocent Spouse Relief must sign IRS Form 8857, Request for Innocent Spouse Relief.
What Are the Requirements for Innocent Spouse Relief?
The Innocent Spouse Rule does not provide automatic relief, so taxpayers must meet certain criteria before they can file a claim. In order to qualify, they must be able to demonstrate that their spouse failed to report income, incorrectly reported income, inaccurately reported deductions, or improperly claimed credits. Additionally, the taxpayer must file their claim within two years of the date the Internal Revenue Service (IRS) notified them of the debt.
What Are the Benefits of Innocent Spouse Relief?
By filing for Innocent Spouse Relief, taxpayers can avoid liability for any unpaid taxes, penalty fees, interest, and other fees associated with the underpayment or misdeclaration. In addition, the IRS will not initiate collection activities on the taxpayer’s behalf while the claim is being processed.
When Should Taxpayers File for Innocent Spouse Relief?
Taxpayers should consult with an experienced tax professional to ensure they meet the conditions for Innocent Spouse Relief before filing the necessary paperwork. And it’s advisable to file before the two year statute of limitations runs out. Ignoring a joint tax debt can have serious financial consequences for both spouses, so it’s important to explore your options as soon as you become aware of a possible situation.