Everything You Need to Know About Innocent Spouse Relief

When dealing with Oklahoma taxes, what is meant by “Innocent Spouse Relief?” Professionals from Hutton Tax Solutions answer this and more. Contact us today!

What Is Innocent Spouse Relief?

The Internal Revenue Service (IRS) was created to ensure that individuals and businesses do their part to help financially support the United States. They meticulously assess individual cases, looking for unreported income and comparing the facts to the person’s filing status. In some scenarios where a person’s current or former spouse created issues that result in negative consequences in tax court, requesting innocent spouse relief may help.

Innocent spouse relief provides that an individual may be relieved from responsibility for certain debts if they can show that they were an “innocent” spouse and did not contribute to the creation of the debt.

A qualified Oklahoma tax attorney may be able to help you request innocent spouse relief.

How Does Innocent Spouse Relief Work?

Innocent spouse relief is a type of assistance that’s available to married couples. This relief is intended to help spouses who aren’t responsible for tax debts. The IRS defines an innocent spouse as someone unaware of the tax liability or did not know they were responsible for it. 

The IRS will only grant this relief if the following conditions are met:

  • You were not aware that your spouse or former spouse had underreported income on a joint return or not paid taxes on it

  • It is your spouse or former spouse who is responsible for underpaying taxes

  • Your liability for the underpayment or unpaid tax is unfair

Proving that the Paying the Unpaid Tax is Unfair

Defining what factors the IRS will consider when determining whether a person would be unfairly held liable is a bit more complicated, but the IRS has provided some guidance. These factors include the following:

  1. Comparing your financial resources with those of your spouse or former spouse
  2. Health-related factors, such as your mental and physical state
  3. How well you complied with all tax laws for the years in question;
  4. If you filed all of your tax returns
  5. Proof that you did not profit from the underpayment of taxes.

There are many factors that the IRS will consider. They may also consider other factors relevant to the case.

Types of Innocent Spouse Relief

Basically, innocent spouse relief is a way to absolve one of two taxpayers, that are spouses, of part or all of their joint tax debt, including interest, penalties, and taxes.

There are three types of innocent spouse relief:

1. Relief by Separation of Liabilities

Tax liabilities are basically split between you and your spouse by the IRS. Your responsibility will only be limited to the portion that has been assigned to you.

2. Injured Spouse Relief

An injured spouse claim may allow you to recover your money if your refund has been taken to pay for your spouse’s debt (usually child support).

3. Equitable Relief

Generally, spousal relief of this type is requested if you are ineligible for any of the other types. Generally, the IRS has to agree that holding you liable for your spouse’s tax debt is unfair. The IRS considers several factors in determining eligibility, including knowledge, domestic abuse, separation/divorce actions, benefits, and future tax compliance.

How to Get Innocent Spouse Tax Relief?

This relief is subject to certain requirements. These include:

  • You must have filed a joint tax return for at least one of the years during which you were married and filing separately

  • During the year for which relief is sought, you must not have been convicted of a felony

  • You must not be liable for any part of the tax liability from that joint return

What Is the Timeframe for Getting Innocent Spouse Relief?

The process of getting innocent spouse relief takes time, and it depends on many factors, including how complicated your case is. Generally, the IRS can take up to 6 months to decide on your case. Because they can easily follow up on your case and understand how the appeals process works, an IRS appeals lawyer can be a great asset.

How to File Innocent Spouse Tax Relief?

Joint tax filing is required if both you and your spouse earn income. But if your spouse is not filing taxes or has not filed a tax return for the past three years and you have no idea what they earned, then it could be beneficial for you to file as an innocent spouse.

If you are unsure how to do this, the tax pros at Hutton Tax can help.

Is There an Innocent Spouse Relief Form?

For tax relief, taxpayers must file Form 8857 if they believe only their spouse or former spouse should pay the tax, plus its penalties and interest.

How soon should I file Form 8857?

If you believe that only your spouse or former spouse should be held responsible for a tax liability, you should fill out Form 8857 as soon as possible. You may become aware of liability in one of the following ways.

  • The IRS has examined your tax return, and your tax liability has been proposed to increase.

  • You receive a notice from the IRS.

Generally, you must file Form 8857 no later than two years after IRS attempts to collect the tax. Therefore, do not delay filing, no matter what, even if you do not have the required documentation.

Should I Write an Innocent Spouse Relief Letter?

Generally, an innocent spouse relief letter states that the spouse was not aware of the other spouse’s tax debt and any other information pertinent to the case. Even though a letter isn’t a requirement, you may include one along with any other information you wish to share with the IRS.

An IRS audit lawyer can offer guidance and resources, such as an example of a relief letter.

Can a Lawyer Help With Innocent Spouse Relief?

People who meet certain criteria are eligible for Innocent Spouse Relief and may be able to receive relief from some of their federal tax debt.

If there is an underpayment of tax due to fraud on either part, then it is up to the IRS or a court to decide if they qualify for relief. A skilled IRS tax attorney in Oklahoma can offer advice and advocacy if you need professional assistance.