Innocent Spouse Tax Relief: Liability Information

A new term, innocent spouse tax relief, has been introduced into the tax code because of a growing pattern among married individuals. The need is there because some spouses are absent and will not pay the outstanding tax. Not wanting to burden the innocent spouse with this, they are relieved of the liability for paying the income tax and the tax penalties. Also, there are several cases where the innocent spouse tax relief can provide protection from the other spouse who has filed falsified returns.

A Pattern That Continues

Tax relief for the innocent spouse is something that is becoming more and more common. There are several reasons for this. For example, the husband might have died with unpaid taxes. He may have declared bankruptcy. It may be that the wife has underpaid her taxes during the year. Before the law changed, the Internal Revenue Service would collect these back taxes from someone because they signed a joint tax return.

Law Change

In 1998, lawmakers saw that there was a problem with the tax law. They felt that is was wrong to hold the innocent spouse liable for the unpaid taxes. A lot of the time it was because of a death, divorce or just not knowing. Congress enacted a better way to find relief from the tax burden in three different ways. One of these ways is based on the old innocent spouse tax relief. Another has some more lenient rules with it. The third rule applies when it is deemed unfair to collect taxes from the innocent spouse, even after the first two do not apply.

Be Wary Of Joint Filing

Even with these rules in place, there is still the danger of having to pay the unpaid taxes of your spouse. This is because of the joint filing status you entered into. If you do believe that signing a joint return is risky then do not sign it. You might be held responsible for it in the event your spouse leaves, or decides not pay. You do not have to choose joint filing. It is a decision you can make if you want to. Many people think that it is required if they are married.

Three Forms of Relief

The innocent spouse tax relief is based on three different forms of relief.

  • Innocent Spouse Rule - This is the new 1998 reform of the old innocent spouse tax relief law. If you qualify for this rule you can obtain relief from the unpaid taxes even if you are still married, and even living together. While the arbitration has been lessened, some spouses still find that they are still liable as they do not qualify.
  • Separate Liability Election - As an addition to the innocent spouse rule, you can still elect to have separate liability even if you have filed jointly. This form of relief is only available to you if you are divorced, legally separated, or widowed. If you do meet these requirements, you may be able to innocent spouse tax relief.
  • Equitable Relief - Even with these new rules, there are still going to be times where it is unfair to collect unpaid taxes from the innocent party. This new law allows the IRS to make the determination not to collect the taxes.

Even with all these rules, relief is not certain. Always take care when filing tax returns and make sure that you are protected.