This is the ninth post in the Collection Options series. This series is dedicated to presenting individuals and businesses with options for dealing with outstanding tax obligations.
Innocent Spouse/Separation of Liability/Equitable Relief. IRC 6015. The tax liability on a joint return will often be the result of the conduct of just one of the spouses, but, unfortunately, because they filed a joint return, they are both presumed to be responsible. For example, a wife is an employee who is having taxes withheld while her husband has his own business and is required, but has failed, to pay estimated taxes, resulting in a significant liability of tax, penalty and interest. Normally, in this situation, they will both be responsible for the liability. However, there are some situations when one of the spouses to a joint liability will be deemed an “innocent or injured spouse.” There are three types of relief available for a spouse.
Innocent Spouse Relief.
Understatement. There is an understatement of tax attributable to erroneous items of one spouse filing the return; (Erroneous items include unreported income and incorrect deductions, credit or basis.)
Lack of Knowledge. The spouse establishes that in signing the return, she did not know (and had no reason to know) that there was such an understatement;
Fairness. It would be unfair to hold the innocent spouse liable for the deficiency, taking into account all the facts and circumstances. In determining if it is unfair to hold a spouse responsible for an understatement, the IRS considers many factors including:
ii. Whether the “innocent spouse” was later divorced from or deserted by his or her spouse.