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Innocent Spouse Relief: What do I do if my spouse hasn’t paid our taxes?

The Innocent Spouse Relief is a provision in the US tax code that allows a spouse to be shielded from financial losses brought on by a spouse's failure to pay required taxes.

There’s nothing worse than being betrayed by someone you love. As much as you’d like to think you know your spouse from the inside and out, you might end up shocked to discover that they have kept secrets from you; one of which can be their tax liabilities.

Regardless of the circumstances, you’d probably like to know if the IRS can pursue you for your spouse's unpaid taxes. The quick response: "yes, but only under specific conditions.”

Whether you are now married, separated, or divorced, both you and your spouse could be held accountable for the tax liability if you used the married filing jointly status.

This applies even if you subsequently get divorced. Both of you are liable for any tax liability that occurs (including penalties, interest, or additional taxes). This is true even if a divorce ruling specifies that only one spouse would be liable for any back taxes resulting from previously filed returns.

If you find yourself in this situation, don’t be discouraged because there could be a solution for you. Innocent Spouse Relief can exempt you from paying additional taxes if your spouse underreported taxes owed on your joint tax return and you were unaware of the inaccuracies.

Will I be held responsible for my spouse’s tax liability?

The short answer is yes, but only in some cases. You could be held accountable for your spouse’s wrongdoings, regardless of whether they made bogus deduction claims or simply neglected to pay the IRS the money they owed. If your spouse owes taxes, the IRS may look you up for several reasons depending on when you filed and your filing status. Below, we'll go over the different situations that can put you in danger for your spouse's wrongdoings.

Filing status

One of the crucial factors that influences whether you will be held liable for your spouse's taxes is your filing status. When it comes to paying taxes, married couples have two options: filing jointly or separately. These choices are available regardless of whether you're filing while married to a legal resident or a foreigner. Let's examine each filing status as well as your possible liabilities.

Joint Filing (Married)

Your tax filing status is important because it affects how much of your income is subject to tax. Couples frequently choose joint filing because it offers a number of tax benefits, including:

  • Earned Income Tax Credit
  • Child and Dependent Care Tax Credit
  • American Opportunity Education Tax Credit
  • Student loan interest deductions
  • Lifetime Learning Education Tax Credit
  • Traditional IRA deductions

In addition to receiving tax breaks and being eligible for credits and deductions, filing jointly with your spouse has numerous other advantages. However, there is a drawback if your spouse has IRS debt. When you and your partner file jointly, you take on "joint and several liability," which implies that both of your tax liabilities are combined into one.

Because of this, you are both legally liable for each other's tax obligation. So in this case, yes, you can be held liable for your spouse's mistakes even if you didn't do anything wrong. In this situation the IRS will apply your return to the amount owed by your spouse.

That being said, you can submit an application for Innocent Spouse Relief if you want to contest culpability to prevent your tax refund from going towards your partner's tax debt.

Married But Filing Separately

Another option available to couples when filing their taxes is married filing separately. Why would a couple want to file their taxes separately? A common reason is that some couples don't want to be responsible for their partner's tax obligations. If your spouse is submitting their taxes late, has significant tax debt, or faces any additional penalties, you can safeguard your finances by filing separately while married.

So, if you file separately, is your spouse still responsible for your tax debt? No, because you take on individual responsibility when you file separately.

What to do if the IRS is after you because of your spouse's tax debt

Now that you are aware of the circumstances in which you can be liable for your spouse's unpaid taxes, let's talk about your options for disputing blame in order to safeguard your money and tax refund. The IRS offers the Innocent Spouse Relief Program to individuals who were taxed on their spouse’s behalf.

The Innocent Spouse Relief Program

A spouse may be eligible for innocent spouse relief if their spouse neglected to declare their income, claimed the wrong credits or deductions, or reported their income incorrectly. The term "innocent spouse" refers to a person who was married to someone who knowingly deceived the federal government by underreporting or concealing their income or by claiming excessive tax credits or deductions. The IRS states the following requirements to be eligible for innocent spouse relief:

  • You and your spouse submitted a joint return, and the only error on the return that you can identify is the understatement of tax. Income that your spouse accumulated but did not report on the joint return is an incorrect item. If things are reported wrongly on the joint return they are also inaccurate items including deductions, credits, and property basis.
  • You prove that you were unaware of the understatement of tax and had not been notified of it when you signed the joint return.
  • Given all of the facts and circumstances, it would be unreasonable to hold you accountable for tax understatement.

If you fulfill the requirements, you can request a separate tax obligation by submitting Form 8857. If you feel that your spouse should be held entirely accountable for their tax burden, you may be able to receive relief from tax liability, penalties, and interest.

Talk to a tax professional

Need to apply for Innocent Spouse Relief? Our team of experts here at Tax Debt Resolutions can assess whether or not you qualify. If you do, our team will help you compile all the requirements needed and assist you in filing for the program. If not, our team can help look into alternate options for you. We go above and above to assist our clients who have outstanding tax debt find their way towards relief.

Don't wait for the worst to happen. Call Tax Debt Resolutions today and we'll help you find relief in no time.

Custom Tax Relief Services That Meet Your Specific Needs. What are you waiting for? Call Tax Debt Resolutions LLC and experience relief right away!