Qualifying for Innocent Spouse Relief

Innocent Spouse Relief is a tax settlement option available to certain spouses who believe they should not be held responsible for a tax liability incurred by their partner. Although both members of a married couple are normally held jointly responsible for any tax debt they acquire as a couple, this is not necessarily the case when one spouse inaccurately reports income or deductions without the other spouse’s knowledge. In this case, the IRS may release the unknowing spouse from responsibility for the tax debt, provided that spouse meets certain specific qualifying criteria. Over recent years, the application procedure for obtaining Innocent Spouse Relief has been streamlined, making it a more viable tax relief option for spouses who qualify.

The IRS offers three basic types of Innocent Spouse Relief, each with its own set of qualifying criteria. These options, which cover both married and divorced taxpayers, as well as several different reporting scenarios are outlined below:

General Relief

The General Relief option is available when income has been underreported on a joint tax return without the knowledge of the spouse requesting Innocent Spouse Relief.  This underreporting may be the result of an outright omission of income or the inaccurate reporting of tax deductions. In either case, the request for relief must be filed within two years from the date the innocent spouse is informed of their taxpayer rights. In addition, it must include documentation that the tax liability resulting from the underreporting of income is inequitable. The General Relief option is available to spouses who are legally married, divorced or widowed.

Separate Liability Relief

Separate Liability Relief is used by a spouse who has not been part of the same household as the non-requesting spouse for a minimum of 12 months prior to the time the petition for relief is filed. Furthermore, the requesting spouse must either be divorced or legally separated at the time of the filing. In the case of Separate Liability Relief, the existing tax debt is allocated between the spouses in question, with each spouse being assigned a specific responsibility for paying their portion of the amount owed while, at the same time, being relieved of any responsibility for paying the portion that is allocated to the other spouse.

Deficiency Allocation Relief

Deficiency Allocation Relief, which is also called Equitable Spouse Relief, may apply in addition to one of the other two Innocent Spouse Relief options or when neither of the other measures is applicable. Deficiency Allocation Relief is most often granted when one spouse has misappropriated funds that were designated to make a tax payment without the other spouse’s knowledge.

The most inmportant factor in determining whether a spouse qualifies for Innocent Spouse Relief is knowledge of the reporting error. In most cases, the spouse requesting tax relief must be unaware of the improperly reported income. However, if the requesting spouse is aware of the underreporting of income by their spouse, but does not know the source of the income, they are still eligible to file for Innocent Spouse Relief. No matter what your specific situation, if you feel you are being unfairly held accountable for the tax burden of a spouse, the professionals at Las Vegas Bookkeeping can help you determine your eligibility and apply for any available tax relief.

If you feel that you may be a candidate for Innocent Spouse Relief, the licensed accountants and bookkeepers at Las Vegas Bookkeeping can evaluate your specific situation and recommend the best course of action for you to receive it. Contact the professionals at Las Vegas Bookkeeping by phone at (702) 945-2757 or by email at tina@lasvegasbookkeeping.com to receive a free, no obligation consultation. Get your Innocent Spouse Relief request submitted before applicable time constraints expire!