Domestic Diversions

Innocent spouse relief

Spouses who file joint returns are liable for the entire tax on the return. When taxes are understated, the innocent party may seek relief under the IRS’s innocent spouse principles. (IRS Form 8857)

One form of relief requires that the petitioner show the understatement related to the other spouse, the lack of actual knowledge or reason to knowof the understatement, and the unfairness of holding the petitioner responsible for the understatement. The larger the benefit enjoyed by the petitioner, the greater the likelihood of a “reason to know” and the less likely the IRS will be sympathetic to the claim.

Another form of relief requires that the petitioner show the parties are no longer married or are, essentially, in the process of separating (living apart for 12 months). The separation of the parties sets the stage for the separation of tax liabilities.

The last form of relief requires that the petitioner show the unfairness of being liable for the tax liability. All the facts and circumstances are considered, and again, the larger the benefit enjoyed by the petitioner, the less “unfairness” in paying something toward that benefit and the less likely the IRS will be sympathetic to the claim.

A petitioner who disagrees with the IRS’s determination may seek judicial review in tax court.


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