Most married couples choose to file their taxes jointly in order to take advantage of higher tax breaks. Even if one spouse earns 100% of the income, both spouses are liable for the taxes reported on the return. Therefore, the I.R.S. is able to collect taxes from either spouse, no matter if they earned the money or not, or if they reported the taxes or not. This applies even after couples divorce.
But what happens when, in many families, one spouse takes sole responsibility for filing taxes and does so incorrectly, fraudulently, or not at all? This puts both spouses at risk, and could mean serious financial and legal problems for someone completely blameless.
However, there is one exception to this liability: Innocent Spouse Relief. If a spouse can demonstrate that they were not responsible for the tax understatement, that they were unaware of the tax understatement or that it would be unfair to hold them liable, the I.R.S. may relieve them of all or at least some of the responsibility for the joint tax return.
Innocent Spouse Rules can be applied to both married and divorced couples, though with divorced couples, the innocent party usually has a stronger argument. In either case, Innocent Spouse Rules exist to protect law-abiding citizens. They can save a person from complete financial ruin.
There are three types of relief available for spouses. Basic Innocent Spouse Relief frees spouses from responsibility for taxes owed as a result of failure to report income, improper reporting or making incorrect deductions. Separation of Liability Relief allocates a certain amount of tax to the innocent party for an item incorrectly reported on a tax return. Therefore, the innocent spouse is responsible only for part instead of the entire amount. The final type is Equitable Relief is applied when a spouse does not qualify for the previous two types of relief for an incorrectly filed joint return, or when the correct amount was reported but never paid.
Presenting your case to the I.R.S., however, can be tricky. Tax processes tend to be very complicated and require documentation and a certain legal expertise to navigate them properly. This is why it is strongly recommended to enlist the help of a tax professional. They will be able to assist you so that your finances –and your marriage—can remain protected.