IRS Innocent Spouse Relief
IRS Innocent Spouse Relief can relieve a spouse whom the IRS deems “innocent” from the fraudulent actions of their partner. In some situations, relief can be granted to the innocent spouse even if the innocent spouse knowingly signed a fraudulent return.
What is Innocent Spouse Relief?
What is Innocent Spouse Tax Relief?
IRS Innocent Spouse Relief would excuse a spouse from the tax liability on a jointly filed tax return if their partner committed fraud on a tax return, such as intentionally claiming incorrect deductions, knowingly over-reporting or under-reporting income, or fraudulently claiming tax credits. Generally, the innocent spouse cannot have benefited from the income earned or the lower tax liability. Still, there are exceptions made for extreme circumstances such as spousal abuse.
IRS Innocent Spouse Relief (What You NEED to Know!)
If you’re facing a tax issue caused by your spouse’s or ex-spouse’s errors, IRS Innocent Spouse Relief is a provision to aid you in avoiding the joint tax liability. IRS Form 8857 could relieve you from responsibility for paying the tax liability, interest, and penalties for the tax year that relates to your spouse’s or ex-spouse’s tax troubles.
Benefits of IRS Innocent Spouse Relief
- Avoid Joint Liability: IRS Innocent Spouse Relief can release you from your tax responsibility from the filed or audited tax return.
- Protect Your Financial Future: If the IRS grants relief, you avoid paying the tax, penalties, and interest that your spouse's tax issues may have triggered.
- Peace of Mind: Stop worrying about paying tax debt due to the evil actions of your spouse.
Who Can Apply for IRS Innocent Spouse Relief?
- Unaware of Incorrect Reporting: Generally, you did not know your spouse was intentionally committing fraud on the tax return.
- Unfair to Hold You Liable: Holding you responsible for the debt would be unfair.
- No Direct Benefit: You didn’t benefit from the unpaid tax owed by your spouse, OR:
- You Signed the Return Under Duress: You knew the tax return you signed was fraudulent but undue influence made you sign the return.
How Do I Apply for IRS Innocent Spouse Relief?
- Outline the Facts & Circumstances: Sketch out a timeline of what occurred and why you are innocent.
- Gather Evidence Supporting Documents: Get together documents that support your lack of involvement (or forced involvement) in the tax issue.
- Complete Form 8857: File IRS Form 8857 to request Innocent Spouse Relief and attach your evidence.
- Work With a Tax Professional: Get assistance from a tax expert like Pink Harbor, CPA to navigate the application process.
Tips to Make Your Innocent Spouse Relief Application Successful
- Be Detailed: You must clearly explain why you should not be held liable and provide step-by-step details of your situation.
- Submit Supporting Evidence: Include documentation that shows your lack of involvement in the tax error or unpaid tax, such as financial records or correspondence. The IRS considers substantiation from independent sources as being the most reliable.
- Respond Promptly: If the IRS asks for additional information, respond by the deadline the IRS gives you.
What are the Four Types of Innocent Spouse Relief?
IRS Publication 971, Innocent Spouse Relief, outlines the four types of innocent spouse relief. They are:
- Traditional Innocent Spouse Relief: This offers relief from the joint tax liability if the innocent spouse was unknowing of the understatement of tax an did not benefit from the situation.
- Separation of Liability Relief: This relief is available to those who are legally separated, divorced, or no longer living with their spouse. Separation of Liability Relief allocates responsibility for the unpaid tax, penalty, and resulting interest between the two spouses.
- Equitable Relief:If neither of the previous two types of relief is applicable but it would still be unfair to hold the innocent spouse responsible for the tax liability. Equitable Relief could hold the innocent spouse harmless based on the circumstances.
- Relief From Liability for Tax Attributable to an Item of Community Income: If you live in a community property state, and an item of community income was not correctly reported on the joint tax return, and the innocent spouse was unaware of the issue, this relief type may be an option.
What Qualifies for IRS Innocent Spouse Relief?
What are the Qualifications for Innocent Spouse Relief with the IRS?
To qualify for IRS Innocent Spouse Relief generally, three conditions must be met to qualify for Innocent Spouse Relief with the IRS.
Condition #1:
A Joint Tax Return was Filed: If, instead, you filed a tax return with the filing status of Married Filing Separately, you are automatically not liable for the tax debt our your spouse.
Condition # 2:
No Knowledge or Reason to Know the Joint Return Was Incorrect: Notice that not knowing the tax return was wrong is the sole reasoning. The IRS will judge whether a reasonable person in a similar situation would have been aware of the issue. If the tax return you filed showed that you earned only $50,000 of income but bought a new Lamborghini in cash, you should have known something was amiss. On the other hand, if your spouse was taking the income that wasn’t claimed on the tax return and bought an island home in Tahiti that you did not know of, that is another situation entirely.
Condition # 2:
It Will Be Unfair to Hold You Liable: There are many reasons why holding the innocent spouse liable for the tax liability and resulting penalties and interest from their spouse would be unfair. Let’s examine what we consider to be the top 5 reasons:
- Spousal Abuse or Coercion: If the innocent spouse was unable to challenge the tax return details (or fearful of harmful consequences if they did) because the innocent spouse was the victim of spousal abuse or coercion.
- Lack of Financial Control: The innocent spouse must not have been involved in preparing the tax return and possessed a limited understanding of essential finances.
- Divorce or Separation: This criterion is typically more easily met if the tax liability was not assessed until after the innocent spouse became divorced or separated from the partner with whom the innocent spouse filed the joint tax return. The separation can either be a legal separation or where the innocent spouse has established a separate residence.
- Did Not Significantly Financially Benefit: If you did not significantly benefit from the unpaid tax liability and the gain primarily benefited your spouse, it could be inequitable to impose the tax liability on you, the innocent spouse, because there was no significant benefit to you.
- Severe Health Issues or Disability: If the innocent spouse were dealing with severe medical issues or had a disability that prevented the innocent spouse from comprehending the tax matters fully, it would be unfair to hold the innocent spouse liable.
What is IRS Form 8857?
IRS Form 8857, Request for Innocent Spouse Relief, is the form that allows the innocent spouse to request relief from a joint tax liability. This form ensures that the IRS can collect the essential information to consider your request for innocent spouse relief. We recommend that you do not only submit IRS Form 8857 by itself. Don’t be fooled into thinking that you can only include explanations that fit into the explanatory lines provided. Instead, be as detailed and thorough in your explanation as possible. If you are attaching extra explanatory pages, indicate that extra supporting documents are attached. You should also attach as much supporting documentation as possible that supports your request. The IRS will always determine that third-party documents are the most independent and reliable substantiating documentation. For example, if you were the victim of spousal abuse, letters from a medical provider or police reports would be more independent than letters from yourself or your friends.
How Does Innocent Spouse Relief Work?
Where Do I Send IRS Form 8857?
Send IRS Form 8857, along with all additional explanatory pages and supporting documents and evidence, to the following area:
If Filing by Mail
VIA USPS
VIA PRIVATE DELIVERY SERVICE
Internal Revenue Service
PO Box 120053 Covington, KY 41012
Internal Revenue Service
7940 Kentucky Drive, Stop 840F Florence, KY 41042
If Filing by Fax
The IRS fax number for Form 8857 is 855-233-8558.
If the filing be fax, make sure to:
- Include a cover page identifying you and showing the number of pages in the fax.
- Prior to faxing, be certain that the fax machine's settings are set to produce a fax confirmation page and that the fax scanning is set to a high resolution. If the IRS cannot read the document that you send due to poor resolution issues, the IRS will not be able to consider your request.
- Ensure all pages include your name in the upper left corner and your Social Security Number in the upper right corner. Every page should also show the number of pages being sent and the total number of pages in the entire fax.
- After faxing, carefully examine the fax confirmation page and ensure that all pages are sent.
- Retain the original document you faxed and the fax confirmation sheet. You will need this to prove to the IRS that you submitted the documentation.
How Hard is it to Get Innocent Spouse Relief?
Looking at the statistical data the IRS provides can lead you to believe that it is hard to get innocent spouse relief from the IRS. In October 2023, the Treasury Inspector General for Tax Administration (TIGTA) issued the TIGTA Innocent Spouse Program Audit. The audit shows that the approval rate for IRS Innocent Spouse Relief is meager, ranging from 10% to 25%, depending on factors like the type of relief requested. Do not let this discourage you because two of the top three reasons for rejections were utterly avoidable by the innocent spouse had they properly handed things. These two completely avoidable rejection reasons are Missing Deadlines and Lack of Documentation. The TIGTA report also indicated that 22% of the rejected claims were improperly denied and should have been approved. Using a qualified tax resolution specialist like Pink Harbor, CPA could ensure that your claim does not fall into the common rejection reasons and that an appeal will be filed if your claim is improperly rejected.
Where are IRS Form 8857 Instructions?
IRS Form 8857 Instructions can be found on the IRS website. Simply click here for a direct link to the IRS Form 8857 Instructions. The IRS Form 8857 Instructions were last updated in June 2021.
What is the IRS Innocent Spouse Phone Number?
The IRS Innocent Spouse Relief phone number is 1-855-851-2009. You can use the IRS Innocent Spouse phone number if you need assistance with the request you filed or if you need more information about IRS Innocent Spouse Relief before filing IRS Form 8857.
Does States Have Innocent Spouse Relief?
What is the Difference Between IRS Innocent Spouse and Injured Spouse?
What is the Difference Between IRS Injured Spouse and Innocent Spouse Relief?
It is not uncommon to wonder what is the difference between IRS Innocent Spouse and Injured Spouse Relief. This is because the names of the relief provisions often contradict the definitions of the words innocent and injured.
IRS Innocent Spouse Relief protects a spouse from joint tax liability when their partner’s incorrect reporting on a joint return caused an understatement of tax, and they were unaware of the error.
Injured Spouse Relief allows a spouse to reclaim their portion of a tax refund seized to pay their partner’s past debts, such as unpaid child support or student loans.
What to Do If You Are Denied IRS Innocent Spouse Relief
Don’t give up if the IRS denies your Innocent Spouse Relief request. There are still options to challenge the decision and seek a fair resolution.
Tips for Handling a Denial of Innocent Spouse Relief
- Request an Appeal: You can appeal the IRS’s decision by filing IRS Form 12509 , Request for Appeals Review, to formally challenge the denial. Having a professional like Pink Harbor, CPA can aid in filing a proper appeal.
- Gather Additional Evidence: Determine why the IRS's denied your request and collect new or more detailed documentation that supports your relief claim.
- Consider Equitable Relief: Even if you were denied IRS Innocent Spouse Relief, you might qualify for IRS Equitible Relief: under different circumstances.
- Consider Equitable Relief: If you feel you were denied IRS Innocent Spouse Relief, file IRS Form 911 to ask the Taxpayer Advocate for help.
What Other Types of IRS Tax Resolution Options Are There?
Other types of IRS Tax Resolution Options that Pink Harbor, CPA can assist you with are:
What Types of IRS Tax Problems Can Pink Harbor, CPA Help Me With?
Other types of IRS Tax Resolution Options that Pink Harbor, CPA can assist you with are:
