MY SPOUSE DIDN’T REPORT INCOME: NOW THE IRS IS AFTER ME PERSONALLY!

By James R. Maring

Photography by Thuen Studios thuendesign.com

Most married couples file joint federal income tax returns rather than separate returns for certain tax advantages that filing jointly provides. When you file a joint income return, both spouses are jointly and individually responsible for all tax amounts due on the return regardless of which spouse actually earned the income. This even applies if the couple divorces and the divorce decree states that one spouse is responsible for the taxes owed. This generally is not a concern for most married couples that stay married, report all income earned, and pay the taxes owed timely. However, what happens when income is underreported on a return or taxes are not paid?

It is possible for one spouse to be relieved of paying the taxes, interest and penalties on a joint tax return in certain situations. The three types of relief available are: (1) Innocent Spouse Relief, (2) Separation of Liability, (3) or Equitable Relief. This article will provide a brief summary of when these forms of relief may be available to a spouse based on their own facts and circumstances.

Innocent Spouse Relief allows you to be relieved of the responsibility of paying taxes, interest and penalties if your spouse (or former spouse) improperly omitted items of income on your joint tax return. Generally, to qualify for Innocent Spouse Relief, you must have filed a joint return which has an understatement of tax due to erroneous items of your spouse (or former spouse), and you must establish that at the time you signed the joint return, you did not know, and had no reason to know, that there was an understatement of tax.

Separation of Liability relief allows you to separate or allocate the understatement of tax (plus interest and penalties) of your joint return between you and your spouse (or former spouse). This type of relief is available only for unpaid liabilities resulting from understatements of tax. Generally, to qualify for this relief you must have filed a joint return and are no longer married to (this includes widowed), or are legally separated from, the spouse with whom you filed the joint return for which you are requesting relief. You may also qualify if you are not a member of the same household as the spouse with whom you filed the joint return at any time during the 12-month period ending on the date you file for relief with the IRS.

Equitable Relief may be also be available if you do not qualify for the two previous forms of relief. Unlike Innocent Spouse Relief or Separation of Liability, you can obtain Equitable Relief from simply an understatement of tax or an underpayment of tax if certain requirements are met.

The list of qualifying conditions for these three forms of relief are too lengthy to lay out specifically in this article. However, if you are interested in researching this issue further, please read the IRS Publication 971 which explains each of these forms of relief and their requirements in great detail.

This article was prepared by Jim Maring, a tax attorney with the Serkland Law Firm in Fargo, North Dakota.

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