Burkhart, Peterson & Company

The IRS states that taxpayers are jointly and severally responsible for the tax balance due on a joint tax return, even if they later divorce. This is true even if the divorce decree states otherwise.

Fortunately, programs have been developed to free one spouse from liability in cases where it would be unjust to hold them responsible for tax debts that truly belong to the other spouse. The available relief falls into three program classifications, all of which are similar to one another, but slightly different. The three relief programs are innocent spouse relief, separation of liabilities and equitable relief, as shown below.

IRS publications state that to qualify for innocent spouse relief, a taxpayer must meet all the following conditions:

The jointly filed return must have understated the actual tax balance that was really owed;
The understated amounts must be due to erroneous items of the spouse and not of one's own;
It must be established that at the time the joint return was signed, the taxpayer did not know, and had no reason to know, that there was an understatement of tax;
Taking into account all the facts and circumstances, it would be unfair to hold the taxpayer liable for the understatement of tax; and
The relief is requested within 2 years after the date on which the IRS first began collection activity against the taxpayer on the underreported tax amounts.

IRS publications state that if a taxpayer is only partly responsible for the additional tax assessments resulting from the understatement of an originally filed joint return with understated tax, then that taxpayer may qualify for separation of liabilities if:

They are no longer married to, or are legally separated from the spouse with whom they filed a joint return; or
They were not a member of the same household as the spouse you signed a joint return with during the 12 month period ending on the date the form 8857 is filed.

In the event that a taxpayer is deemed not to qualify for either innocent spouse relief or separation of liabilities, relief might still be available through the equitable relief program. This program gives the IRS a great deal of flexibility in determining if a spouse should be relieved of liability. If the IRS can be convinced that one spouse was unaware or not at fault for the creation of a tax liability, then it is common for that spouse to be entirely relieved of existing liabilities.

If you believe that you may be a good candidate for innocent spouse relief, separation of liabilities or equitable relief, contact our office to discuss these programs and to start the process of applying.