Taxes: Another tie that can bind, unless you know your rights
On a number of occasions, we have discussed the innocent spouse rule. In the context of family law, you might think this has something to do with a spouse who cheats on you. In the context of taxes, however, the issue has to do with a spouse cheating on the IRS and you finding yourself on the hook for their debt obligation. In this instance, the innocent spouse rule is a provision the IRS can use to show some mercy.
Taxpayers have rights that are actually spelled out in federal law. Among them is the right to expect that if you are subject to circumstances or conditions that might mitigate your normal tax obligations, the IRS will duly consider an appeal for relief. There are various methods for addressing tax debt problems. Some aim to come to reach an agreement on how to settle the amount in dispute. Invoking the innocent spouse rule aims to free the claimant from the obligation altogether.
Innocent spouse requirements
At its core, this rule is an acknowledgment that sometimes one spouse doesn’t know when the other spouse is purposely evading taxes.
Normally, if you filed tax returns jointly, both parties to the return would be liable for any debt, penalty or fine that might result from underreported income or unpaid taxes. If you divorced, or even if your spouse has died, the obligation brought about by that spouse’s improper actions can land in your lap.
However, if you can show you didn’t know and equally that you had no reason to know, you might qualify for innocent spouse relief.
Another factor the IRS might consider is if, as a spouse, you are or were a victim of domestic abuse. Under such a claim, it might be possible to show that you signed a joint return under duress.
Whether your situation is one that might allow you to seek innocent spouse status is something to consider carefully with experienced legal counsel. If you do proceed, you need to be aware that you’ll have to file a special seven-page IRS form.
That, too, is something that should be done under the guidance of an attorney because of the nature of the information involved.