The IRS has the authority to collect from both spouses, regardless of who earned money and whether or not a joint tax return is filed. Section 6013 of the Code of Civil Procedure (d).
Innocent spose criteria:
” there is an understatement of tax attributable to erroneous items of one individual filing the joint return”
So, innocent spouse relief can be used if your spouse underreported tax and now the IRS sends letters demanding that tax, and you had no involvement in the finances.
If the tax liability was reported CORRECTLY and the taxes simply have not been paid, then most divorce settlements will provide that for each year of marriage, both spouses are jointly responsible for the couple’s federal income tax liability and also entitled to half of any income for any year of marriage.
So, if there is income reported (you have not received the 50% of it) and are now liable for the 50% tax on it, then, it would be a divorce lawyer’s job to make sure that you are not liable (since no income was received by you). If the divorce lawyer proves it and the judge orders the spouse to pay the taxes owed, and the spouse fails to pay the marital tax debt after the divorce, you may bring him/her to court for failure to comply with the divorce order.
This was not legal advice by the way, since I’m not a lawyer.
There are several questions you may want to review when trying to navigate the innocent spouse relief approach: https://www.law.cornell.edu/uscode/text/26/6015
- -Was the Joint Tax Return filed legally?
- -What was the intention of the couple to submit the joint tax return?
- -Was the return filed under duress? Being forced to sign a return sign isn’t the same as really signing a return. Signing a return under duress is not a conscious act on the spouse’s part, who had no intention of signing it, and as a result, being liable for it.
- -Was there ability to comprehend the extent to which the thing has been exaggerated?
- -What were the prior tax filing statutes for the couple?
- -Was one of the spouses protesting the return’s signature requirements or refused to sign the tax return?
- -Is it possible that the innocent spouse was either unaware of or had no reason to be aware of the understatement or fraud?
- -Was there consent to Joint Filing implied by conduct?
Courts have determined that the required intent exists when one spouse tacitly consents to file a joint tax return. In that case, Consent Is implied.
What tacit consent means is that one spouse has implicitly decided to delegate the tax filing responsibility to the other spouse without the other spouse’s knowledge or assent. https://www.law.cornell.edu/uscode/text/26/6015
- -The IRS may want to ask whether the couple has been filing jointly for the past years and never complained about it?
- -Why is one of the spouses now complains about the joint tax return filing?
- -Did the spouse file the prior year on their own?
- -Was the spouse making money?
- -How did the spouse anticipate that her/his return would be submitted if they didn’t file it on his/her own?
Even though clients commonly seek innocent spouse relief, the government believes they are not legitimately innocent spouses. Tactic consent is defined as the acceptance of something without explicitly saying it. One spouse has delegated this responsibility to the other spouse implicitly. Consequently, she/he will no longer assert her/his lack of knowledge that the joint tax return WAS in fact filed.
When to file the claim for relief?
A claim for relief should be filed within two years after the commencement of collection proceedings. Liabilities are allocated logically. Refunds are available for up to three years following the tax return filing. You must have been divorced or legally separated from your spouse for a minimum of 12 months. Upon filing a case in tax court, the spouse or non-requesting spouse is advised that their spouse has filed a petition in tax court and that they have the option to intervene. https://www.law.cornell.edu/uscode/text/26/6015
In addition to the above factors, the Internal Revenue Service takes into account the following:
The nature of the relationship, difficulties in the marriage. Is the spouse able to obtain any financial documents from the other spouse? Who had control in the marriage? Affluence in terms of physical and emotional well-being and financial security.
Gather evidence to support your point of view.
- -If the innocent spouse indeed signed the returns?
- -incapacity to pay: Is the taxpayer in a position to pay their taxes on a financial basis?
- -bringing it up during your CDP hearing (See Form 12153) Per IRC 6330, the IRS notifies taxpayers of its intention to levy their account via a notice, as well as the taxpayer’s right to a fair hearing throughout the collection procedure (CDP) hearing.
- -filing of a lawsuit against the IRS in a court of law;
- -filing a lawsuit against the taxpayer to collect taxes.
Strategy to avoid joint and several liability and potential tax issues:
If in doubt, file Married Filed Separately. You can amend it later for a joint tax return. It is not possible to amend a joint return to make it a married filing separate tax return. https://www.law.cornell.edu/uscode/text/26/6015
If you file as married filed separately, there is no harm done since you can always amend your filing. A joint return includes a shared sense of responsibility. After a joint tax return has been filed, the spouse may submit a petition for relief on the grounds of an innocent spouse. But the government will be evaluating whether or not this is actually the case.
What is the difference between an innocent spouse and an injured spouse?
An injured spouse is when a spouse wants to allocate joint tax refunds based on spouses’ involvement in the earnings or debt. https://www.irs.gov/forms-pubs/about-form-8379
Who has a substantial benefit from the relief? Will it be justly apportioned, or will another spouse be unjustly enriched?
There will be other concepts that the IRS will consider, such as couples’ health, control level, who was the breadwinner, was there abuse in the marriage?
Can a spouse be considered innocent in calculating their tax if they do not know about the other spouse’s earnings activities nor engaged in it? Yes. https://www.law.cornell.edu/uscode/text/26/6015
What is the timing of the process:
Eight months is an average wait time for the innocent spouse process on the IRS level.
US Tax Court denied petitioner’s request for innocent
spouse relief from joint and several liability on 02/03/22 (Docket No. 1250-20)
Married filing joint tax returns were filed. Later the couple divorced. The wife filed US Tax court petition to decide whether
The couple owned a business together. The wife (the petitioner) was taking care of the business’s paperwork and admin duties while the husband was doing the actual physical labor for the company.
Section 6015 provides a spouse with three
ways to a relief:
(1) full or partial relief;
(2) proportionate relief;
and (3) if it would be inequitable to hold
the requesting spouse liable for all or a portion of the
unpaid tax, equitable relief.
The Tax Court considered the petitioner’s marital status, economic hardship, knowledge or reason to know, legal obligation, compliance with tax law, mental and/or physical health, abuse, and significant benefit.
After weighing all the factors, the court determined that the
knowledge factor weighs heavily against relief for the
To be eligible for reimbursement of litigation expenses, a qualified offer must be submitted.
Even though the taxpayer has won their court case, exhausted all administrative remedies available to them, has not dragged the proceedings on for an excessive amount of time, and has claimed only “reasonable” expenses if the taxpayer hasn’t submitted the “qualified offer,” the taxpayer will be deemed to have lost when the government’s position is substantially grounded (in regards to the litigation expenses reimbursement).
When a taxpayer submits a qualified offer to the government within a certain time frame, the offer is considered qualified. The offer specifies how much of the disputed tax obligation the taxpayer feels they genuinely owe and is willing to pay, as well as the date on which the offer is made.
Specifically, this offer should reserve the right to claim innocent spouse relief, as well as the sum provided that, if accepted by the Internal Revenue Service, may eliminate/ reduce the taxpayer’s income tax liability.
If you make the qualified offer, the IRS’s stance may not be substantially warranted in such a case.