When 2 Becomes 10

When 2 becomes 10 - Innocent Spouse and the IRS, and Other Types of Relief

Not often does the Internal Revenue Service grant extraordinary relief to taxpayers. But this announcement deserves the attention of those spouses that fall into the category as the "innocent spouse." Yet, many spouses may not believe they may fall into this category.

Take, for example, the innocent spouse where an erroneous item was reported on your joint tax return, and now you are divorced. Should the spouse who owes no money to the IRS be penalized for the tax obligations owed by their spouse?

The IRS grants equitable relief to the innocent spouse. Previously, the IRS required that any claim be made within two years, but, recently, the IRS granted favorable relief, namely, the extension of time to claim relief for a period of ten years.

Now an innocent spouse who was denied relief due to the expiration of the two year period has the opportunity to reapply. That's right, you now may claim relief if the collection statute of limitations for the tax years involved has not expired.

To qualify for innocent spouse relief, here is what you need to prove:

•1. You filed a joint return

•2. There is an understated tax on the return that is due to erroneous items of your spouse - not you.

•3. You can show that when you signed the joint return you did not know, and had no reason to know, that the understated tax existed.

•4. Taking into account all the facts and circumstances, it would be unfair to hold you liable for understated taxes.

Don't forget that a spouse may also seek "Separation of Liability Relief." This type of relief allows a spouse or former spouse to allocate the understated tax (plus interest and penalties) on the joint return. For example, you may be eligible to file a claim for a refund of your portion of the federal income taxes in a marriage where one spouse owes money to the IRS, if the husband or wife owes payroll taxes from his or her business, if the husband or wife has a failed business, or if the husband or wife owed money to the IRS prior to the marriage, and the IRS withheld a federal income tax refund from a jointly held tax return. And if you do not qualify for innocent spouse or separation of liability relief, you may seek relief under equitable relief from the IRS.

You should act now before the time expires for any type of relief granted by the Internal Revenue Service.