When you file a joint tax return, both spouses are generally liable for the full amount of tax owed — even if only one spouse earned the income or made the errors. This rule, called joint and several liability, can create nightmares for people whose spouses hid income, claimed improper deductions, or simply failed to pay. Innocent Spouse Relief exists for exactly these situations.
Who Qualifies for Innocent Spouse Relief?
To qualify, you must show that you filed a joint return with an understatement of tax that was attributable to your spouse erroneous items, that at the time you signed the return you did not know and had no reason to know about the understatement, and that taking into account all the facts and circumstances, it would be unfair to hold you liable. The IRS considers factors like whether you received a significant benefit from the understated tax, whether you were abandoned or divorced, and your education and involvement in household finances.
Types of Relief Available
There are actually three types of relief. Classic Innocent Spouse Relief applies when there is an understatement of tax due to your spouse errors. Separation of Liability Relief divides the understatement between you and your former spouse — available if you are divorced, legally separated, or have lived apart for at least 12 months. Equitable Relief applies when you do not qualify for the other types but it would still be unfair to hold you liable — this can even cover underpayments where the tax was correctly reported but never paid.
Time Limits and How to Apply
You generally must file Form 8857 within two years after the IRS first attempts to collect from you. The IRS must then determine your eligibility and will contact your spouse or former spouse, who has the right to participate in the proceedings. This can be uncomfortable, but it is a necessary part of the process. The IRS is prohibited from collecting from you while your request is being reviewed.