Marriage is a funny thing in the eyes of the law. It’s a union of two people, both spiritually and legally — and it has major implications for tax obligations, as well. As we all know, sometimes marriages don’t work out. Sometimes they result in a financial mess, whether that mess is created intentionally or not. And sometimes, what’s fair for one spouse isn’t equitable for both.
Believe it or not, the IRS is actually pretty good about offering a variety of options for both single individuals and spouses who find themselves in a bind when it comes to their taxes. Today, we’re taking a deep dive into the IRS’ innocent spouse relief program and exploring potential options, should you find yourself in this uniquely tricky scenario.
In order to fully unpack the innocent spouse relief rule, we first have to understand a little bit about the way the US government and the IRS view married couples from a taxable standpoint. As you may know, there are two options for married couples filing their tax returns: filing jointly, or filing separately.
You need to realize that filing separately is absolutely not the same thing as filing as though you were “single.” In fact, married filing separately is a rather uncommon tactic, as this approach almost always results in a higher tax obligation. Thus, the vast majority of married couples file jointly.
Yet, as we know, in many of those marriages there will not be an equal involvement in the couple’s finances. In some marriages, one partner handles all the money matters, perhaps in exchange for other household concerns being handled by the other partner. And unfortunately, there are also many financially abusive marriages in which one partner has a vice grip on the couple’s tax prep and finances, leaving the other partner totally in the dark — and potentially an unwitting accessory to tax fraud.
It’s for that exact reason that the IRS has codified a powerful avenue called “innocent spouse relief” into US tax law. Essentially, it’s an escape hatch for one married partner to claim ignorance of the other’s mistakes or criminal wrongdoing. This is important, because when filing jointly as a married couple, the two partners are viewed as one in the eyes of the law. That means both partners take equal and joint responsibility for the information they submit to the Internal Revenue Service.
You can see the potential problem: if one spouse decides to embark on an illegal tax scheme — or if they’re simply incompetent at preparing their taxes — the other partner will legally take the full brunt of the consequences as well. This is an obvious concern, particularly in malicious cases where one partner is financially abusive or controls the couple’s finances totally.
Generally speaking, most relief offered by the IRS when it comes to innocent spouse protection is going to fall under one of three main umbrellas: classic innocent spouse relief, separation of liability, and equitable relief. Let’s take a closer look at these avenues to understand exactly who can best benefit from the unique protection afforded by each one.
As you can imagine, many people who seek information about innocent spouse relief are in a precarious position. They’ve recently learned of major wrongdoing (or errors) on the part of their spouse, and many of these real-life situations are volatile. Discovering that your husband or wife was carrying out tax fraud right under your nose — to your own legal detriment — can cause some heated situations.
Therefore, it can be worth meeting with a legal professional to discuss your rights and options, should you find yourself in need of innocent spouse relief. A qualified attorney can help further shield you against additional liability and guide you toward the smoothest possible resolution of your situation.
A tax attorney can help take the stress and logistical burden off of your shoulders while pursuing innocent spouse relief, giving you more time to sort out your domestic arrangements and limit additional damage to your way of life. An innocent spouse relief attorney can also use their expert knowledge of this area of the law to give you the very best chance at a successful result when you petition the IRS for relief.
However, if you want to attempt this process on your own, you may request innocent spouse relief yourself starting with Form 8857: https://www.irs.gov/pub/irs-pdf/f8857.pdf