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The processing time for IRS Innocent Spouse Relief claims can vary due to several mitigating factors, but according to the IRS, can “take up to 6 months or longer.” Understanding taxes can be tough, especially when it comes to shared money and tax liabilities. Worse yet, imagine being blamed for mistakes your partner made on taxes when you did not do anything wrong – and may not have even known that they were doing something illegal in the first place! This is an all too common occurrence for people across the country every day, but there is a solution and it is called IRS Innocent Spouse Relief. For many, Innocent Spouse Relief serves as a potential way to resolve unjust liabilities. This article explains what this relief is, how it works, and how it helps protect you from unfair tax troubles.

The IRS Reform and Restructuring Act of 1998, P.L. 105-206, introduces three distinct types of Innocent Spouse Relief provisions:

  • IRC 6015(b) – True or Traditional Innocent Spouse Relief: This provision grants relief to the requesting spouse from tax liabilities, penalties, and interest if the liability arose due to a lack of knowledge on their part. It’s essential to substantiate this lack of knowledge, which can be a complex endeavor as it involves proving a negative assertion.
  • IRC 6015(c) – Separation of Liability Relief: Designed for spouses who are divorced, separated, or not living together, this relief allocates tax liabilities between the spouses, relieving the requesting spouse from specific deficiencies linked to their partner’s actions.
  • IRC 6015(f) – Equitable Relief: When circumstances do not align with the conditions of IRC 6015(b) or 6015(c), equitable relief comes into play. This discretionary provision allows the IRS to offer relief from deficiencies and underpayments, based on a careful evaluation of the facts and circumstances.

Definition of Innocent Spouse Relief

IRS Innocent Spouse Relief stands as a pivotal provision within the complexity of the U.S. tax framework. It operates as a safeguard tailored to shield individuals from undue tax burdens stemming from the financial missteps or errors committed by their spouse or partner. This relief mechanism serves to correct instances where a person finds themselves embroiled in joint tax liabilities that have been created due to their partner’s financial actions, despite their own innocence in the matter. By invoking Innocent Spouse Relief, eligible individuals are sometimes able to disentangle themselves from certain tax debts, penalties, and accrued interest that may have surfaced due to their spouse’s financial decisions, thereby fostering a more just and equitable distribution of tax responsibilities.

How is Innocent Spouse Relief Different Than Injured Spouse Relief?

IRS Innocent Spouse Relief and Injured Spouse Relief are two distinct provisions within our tax law that offer different forms of financial protection to individuals facing unique challenges. While both provisions aim to alleviate financial strains related to taxes, they ultimately solve different problems. 

IRS Innocent Spouse Relief: IRS Innocent Spouse Relief is designed to assist individuals who are unfairly burdened with joint tax liabilities resulting from their spouse’s or partner’s financial mismanagement or errors. This relief is applicable when one party in a couple is genuinely unaware of or uninvolved in the financial actions that led to the tax liabilities, penalties, and interest in question. By obtaining Innocent Spouse Relief, the innocent individual can be released from the responsibility of paying these specific tax debts attributed to the actions of their spouse.

Injured Spouse Relief: Injured Spouse Relief comes into play when one spouse has unpaid federal or state obligations, such as child support or past-due student loans, and the other spouse wants to protect their share of the joint tax refund from being seized to cover those obligations. Injured Spouse Relief allows the “injured” or non-debtor spouse to claim their rightful portion of the joint tax refund. This provision prevents the non-debtor spouse from being harmed by the financial obligations of the other spouse, and it ensures that they receive their rightful share of the tax refund without it being offset by the other spouse’s debts.

Who qualifies for innocent spouse relief?

The IRS offers Innocent Spouse Relief to individuals who satisfy specific criteria and can provide evidence that they should not be held accountable for certain tax obligations that arise due to actions taken by their spouse. This relief acknowledges situations where it would be unfair or inequitable to hold one spouse responsible for the tax liabilities resulting from the actions of the other spouse. Eligibility for this relief is determined based on factors such as whether the requesting spouse had knowledge of the inaccuracies or underpayments on the tax return, the financial and economic hardship it would cause, and whether it would be just to enforce joint liability.

H2 What Are the Innocent Spouse Relief Options?

Innocent Spouse Relief Options fall into three categories: Traditional Innocent Spouse Relief, Separation of Liability Relief, and Equitable Relief. 

Traditional Innocent Spouse Relief

IRC 6015(b) – True or Traditional Innocent Spouse Relief: To meet the criteria for lack of knowledge, the taxpayer must genuinely and verifiably be unaware of errors on the return. This can be intricate since it involves demonstrating the absence of awareness, a challenging task.

As stated in the instructions for Form 8857, Request for Innocent Spouse Relief: “If you were aware of any elements causing the understated tax when you endorsed the joint return, this request will not pertain to the related understated tax portion.”

A requesting spouse is considered to possess knowledge or reasonable awareness of an understatement if they either were aware of the understatement or if a sensible person in similar circumstances would have had such awareness, as outlined in Jacobsen v. Commissioner, T.C. Memo 2018-115.

Separation of Liability Relief

IRC 6015(c) – Separation of Liability Relief: This provision deals with situations where tax inaccuracies are present on tax returns or are identified during audits. It encompasses both settled and outstanding tax liabilities. The spouse requesting relief seeks to untangle their tax responsibilities from the non-compliant partner by dividing the tax obligations.

To be eligible for separation of liability relief, the taxpayer must either be divorced or living separately for a minimum of 12 months when making the relief request. Additionally, they must have jointly filed a tax return with the non-requesting spouse. The responsibility to provide evidence rests with the requesting spouse to establish the specific portion of the tax liability for which they should not be held responsible. They must demonstrate that the non-requesting spouse is accountable for that specific tax liability.

Similar to IRC 6015(b), the knowledge requirement also applies to separation of liability relief requests. As per the instructions for Form 8857, if the spouse was aware of any factors contributing to the understated tax when they signed the joint return, the request will not cover the related portion of the understated tax.

Equitable Relief

IRC 6015(f) – Equitable Relief IRC 6015(f) serves as a remedy of last resort, coming into play when the provisions of IRC 6015(b) and 6015(c) are either inapplicable or have been denied. This relief option steps in when it is unfair to hold the spouse making the request responsible for the tax debt.

The determination to grant equitable relief aligns with the principles outlined in Revenue Procedure 2013-34. This procedure allows the Secretary the authority to grant equitable relief if, after considering all relevant factors, it is deemed inequitable to hold the requesting spouse liable for unpaid taxes or deficiencies.

Unlike the time-based limitations imposed by IRC 6015(b) and 6015(c), IRC 6015(f) remains in effect until the expiration of the collection statute of limitations (CSED), affording a greater degree of flexibility with regard to timing.

Chiang, Kalelkar, and Dong of the AICPA delineate that Revenue Procedure 2013-34 establishes a comprehensive set of seven criteria for evaluating requests for equitable relief. These criteria include: the marital status of the requesting spouse, potential economic hardships, the level of awareness or reasonable knowledge concerning understated items, legal obligations arising from divorce decrees, advantages obtained from unpaid taxes, demonstrated good faith efforts to comply with tax regulations, and the physical or mental well-being of the spouse. This framework provides a thorough and structured approach for assessing eligibility for equitable relief.

Statute of Limitations for Requesting Innocent Spouse Relief

Many ask when they should file their Innocent Spouse Relief request. The statute of limitations for Innocent Spouse Relief and Separation of Liability Relief is generally 2 years from the IRS’s initial collection activity (This doesn’t include certain notices like balance due notices (CP501 to CP504), which don’t count. Collection attempts like Letter 11, Notice of Intent to Seize, and LT 1058, the formal Notice of Intent to Levy, start the two-year countdown. A Statutory Notice of Deficiency can also begin this countdown), while Equitable Relief does not have a specific time limit. 

How Long is the Statute of Limitations?

In general, the taxpayer has 2 years from the first attempt by the government to collect to apply for Innocent Spouse relief. The general collection statute of limitations is 10 years for IRS debts

Does the Statute Of Limitations Affect All Forms of Innocent Spouse Relief?

No, the statute of limitations doesn’t affect all forms of Innocent Spouse Relief in the same way. For Equitable Relief under IRC 6015(f), there is no specific time limit for filing, as it’s not bound by the usual statute of limitations. However, for Relief by Separation of Liability (IRC 6015(c)) and Relief from Joint and Several Liability (IRC 6015(b)), the requesting spouse generally has 2 years from the date the IRS begins collection activities to apply for relief. So, while the statute of limitations does impact some forms of Innocent Spouse Relief, it doesn’t apply uniformly to all.

Form 8857

IRS Form 8857 to file for Innocent Spouse Relief can be found here

Frequently Asked Questions

H3: What is the difference between Form 8379 and 8857

Form 8379 is for Injured Spouse Allocation, while Form 8857 is for Innocent Spouse Relief. 

H3: What is a request for innocent spouse relief

Innocent spouse relief is when someone asks the IRS to help them not be responsible for a tax debt that they didn’t know about or weren’t part of. When married couples file taxes together, they both have to pay the taxes. But if one person didn’t know about mistakes on the tax return, they can apply for relief. They fill out a form called Form 8857, and the IRS looks at their situation to decide if they can avoid paying that tax debt.

What is the benefit of filing Form 8379 injured spouse allocation

Filling out Form 8379, the Injured Spouse Allocation form, helps protect one spouse’s part of the tax refund when the other spouse owes money. This way, the person who didn’t create the debt still gets their share of the refund. It’s about being fair with money when couples file taxes together.

Which form is titled injured spouse claim and allocation

Form 8379

Does California have an injured spouse form

Yes, the California Franchise Tax Board does have a form for injured spouse relief. It’s called FTB Form 705, “Innocent Joint Filer Relief.” This form is used by California residents to ask for relief from joint tax liability when one spouse shouldn’t be responsible for the other’s debts. It’s like the federal IRS Form 8379 for California state taxes. 

How do Community Property Laws Impact Innocent Spouse Relief?

In community property states like California and Nevada, where a 50/50 distribution of marital items is mandated while the couple is together, innocent spouse claimants must demonstrate their lack of awareness regarding community income to qualify for relief. This can be arduous to prove if the spouse has access to shared accounts. A feasible method to meet this requirement is by showing instances where the non-requesting spouse handled income in cash, leaving no paper trail.

Innocent spouse relief phone number

The IRS does not have a dedicated phone line to assist with Innocent Spouse Relief and all direct calls will need to go to their general phone line for assistance, which is 1-800-829-1040. Please note that call times can be quite long, especially around tax season. 

If you’d like, you can always call Tax Crisis Institute at 661-837-1100 and we are happy to advise you on your Innocent Spouse Claim.