If the IRS says you owe additional tax because of errors on a joint return, the innocent spouse form may offer relief. This situation can arise when your spouse failed to report income, claimed improper deductions or credits, or made other tax errors.
When you file a joint federal income tax return, both spouses generally become responsible for the tax associated with that return. Problems can arise when the IRS later discovers an error connected primarily to one spouse. Under certain circumstances, IRS Form 8857, Request for Innocent Spouse Relief, allows the other spouse to request relief from some or all of that tax liability.
Do not confuse innocent spouse relief with injured spouse relief. They address two different tax problems. If your joint return was correct but the government took your refund to pay your spouse’s separate debt, read our related article, Injured Spouse Form: Recover Your Share of the Refund.
What Is Innocent Spouse Relief?
Married taxpayers who file jointly generally have what the IRS calls joint and several liability. In practical terms, the IRS can generally hold either spouse responsible for the tax, interest, and penalties associated with a joint return.
Form 8857 allows you to ask the IRS for relief from some or all of that liability when you meet the applicable requirements. The IRS looks closely at the circumstances surrounding the tax problem, including what caused it and what you knew about it.
For example, suppose a married couple files a joint tax return. One spouse owns a business and handles all of its finances. That spouse fails to report a significant amount of business income. The other spouse has little involvement with the business and signs the return without knowing about the missing income.
Later, the IRS audits the return and assesses additional tax, penalties, and interest. Since the couple filed jointly, the IRS may initially seek payment from either spouse. However, the spouse who did not know about the missing income may qualify for innocent spouse relief. Form 8857 allows that spouse to request relief, although the IRS does not approve every request.
What Types of Innocent Spouse Relief Are Available?
The IRS recognizes different forms of innocent spouse relief. The appropriate type depends on your circumstances.
Traditional innocent spouse relief may apply when a joint return understates the tax because of an erroneous item connected to the other spouse. Examples include unreported income, incorrect deductions, improper credits, incorrect basis, or improperly reported business expenses. The IRS also considers whether you knew or had reason to know about the error when you signed the return.
Separation of liability relief works differently. In certain circumstances, the IRS can divide an understated tax between spouses or former spouses. This option may apply when taxpayers are divorced, legally separated, or have lived apart for the required period. The IRS then determines which portion of the liability belongs to each spouse.
Equitable relief may provide another option when you do not qualify for the other types of relief. The IRS reviews all the facts and circumstances and considers whether holding you responsible for the tax would be unfair.
What Does the IRS Consider?
The IRS does not look at only one factor when deciding an innocent spouse request. Instead, it considers the type of relief you requested and the circumstances surrounding your case.
For example, the IRS may examine who earned the income that caused the additional tax and who claimed the deduction or credit at issue. It can also consider whether you knew about the error or had reason to know about it. Your involvement in household finances may also matter.
Your marital and living situation can play a role as well. The IRS may consider whether you received a significant benefit from the understated tax. Depending on the type of relief, it may also consider financial hardship, abuse, coercion, or financial control.
The IRS can also review your subsequent compliance with federal tax laws and other relevant circumstances. Because every situation is different, no single fact automatically determines whether you qualify.
Unlike an injured spouse claim, an innocent spouse request does not primarily involve dividing a refund between two spouses. Instead, the IRS decides whether you should remain responsible for some or all of the joint tax liability.
When and How Should You File Form 8857?
You should consider requesting innocent spouse relief as soon as you become aware of a tax liability that may qualify. You might learn about the problem through an IRS audit, a notice of additional tax, a collection notice, or correspondence about previously unreported income.
Deadlines can depend on the type of relief and your individual circumstances. For that reason, you should not assume that you can wait indefinitely before requesting relief.
You file Form 8857 separately from your regular income tax return. When completing the form, answer each question carefully and provide documents that support your request. Missing or unclear information can delay the IRS review.
Useful records may include IRS notices, tax returns, Forms W-2 and 1099, bank records, and business records. Divorce or separation documents may also help when they relate to your claim. Depending on your circumstances, financial records or documents showing economic hardship may provide additional support.
Communications between you and your spouse can also become important. The goal is not to overwhelm the IRS with documents. Instead, your records should help explain and support the circumstances described in your request.
Will Your Spouse or Former Spouse Find Out?
You should know that requesting innocent spouse relief generally involves your spouse or former spouse. The IRS generally notifies the person who filed the joint return with you and gives that person an opportunity to provide information.
The IRS protects certain personal information during the process. However, you generally should not expect to pursue an innocent spouse request without your spouse or former spouse learning about it.
Innocent Spouse vs. Injured Spouse
People often confuse innocent spouse relief with injured spouse relief, but the distinction is fairly simple.
Innocent spouse relief addresses additional tax associated with a joint return. For example, your spouse may have failed to report income or claimed an improper deduction. The IRS may then try to collect the resulting tax from you because you filed jointly. Form 8857 allows you to request relief when you meet the requirements.
Injured spouse relief addresses a refund rather than responsibility for additional tax. For example, the government may take your joint refund to pay your spouse’s past-due child support, federal tax debt, or another qualifying separate debt. Form 8379 may allow you to recover your share of that refund.
An easy way to remember the difference is to ask what happened. If the IRS says you owe additional tax because of an issue connected to your spouse, you may need Form 8857. If the government took your joint refund to pay your spouse’s separate debt, you may need Form 8379.
For a detailed explanation of Form 8379, read our related article, Injured Spouse Form: Recover Your Share of the Refund.
Need Help With Form 8857?
Innocent spouse cases can become complicated because the IRS looks at both the tax issue and the facts surrounding your situation. A strong request should clearly explain what happened and include documents that support your position.
PennySmart Group can review your tax returns and IRS notices to help identify the issue that created the liability. We can also help organize your tax and financial records, prepare Form 8857, and assemble supporting documentation for your request.
The IRS makes the final decision based on the applicable rules and your individual circumstances. No tax professional can guarantee that the IRS will approve a request for innocent spouse relief.
If you received an IRS notice involving a joint tax return, contact PennySmart Group to schedule a consultation about your situation. Learn About Our Tax Services
This article provides general tax information and is not legal advice. Eligibility for innocent spouse relief depends on your individual circumstances and applicable IRS rules.