Posted by Carmen Garcia

Innocent Spouse Relief

Innocent Spouse Relief

A particular problem often arises when one spouse feels that he or she has been unfairly affected by the other spouse's tax liability. Married taxpayers who file a joint income tax return are jointly and severally liable for any resulting tax obligations or debts. As this could significantly affect the financial position of married claimants filing joint actions, the IRS introduced innocent spouse relief.

Key Points to Note

  • Taxpayers can request an exemption from tax liability for the spouse/ex-spouse.

  • The spouse has two years to complete Form 8857.

  • The taxpayer wishing to obtain an exemption must submit Form 8857 as soon as he or she becomes aware of a tax obligation.

What is Form 8857 - Innocent Spouse Relief Claim?

Form 8857: Innocent Spouse Application is an Internal Revenue Service (IRS) tax form used by taxpayers to request a tax exemption involving spouse or ex-spouse. In general, couples who file a tax return are jointly and severally liable for any tax liability. When additional unreported income tax and incorrect deductions or credits occur, both partners remain liable, even if they are divorced.

Getting a divorce does not prevent the IRS from holding both parties jointly and severally for a tax debt, even if a divorce judgment provides that only one party is liable for the tax. From the date the IRS is notified of the current tax obligations, the spouse has a two-year window to complete Form 8857.

Submit the form as soon as you can; there is a tax liability that belongs to the spouse/ex-spouse.

Who can complete Form 8857 - Claim for Compensation for an Innocent Spouse?

The taxpayer requesting compensation should complete Form 8857: Innocent Spouse Relief request as soon as they become aware of a tax liability for which the other or former spouse is responsible. However, completing Form 8857 does not guarantee that the requesting taxpayer will be exempt. Some of the qualifications include:

  • Determine that it is unfair to respond to the tax contribution asking for an underestimation

  • Income taxes or withholdings misquoted by the spouse

  • Send a joint return with a tax understatement.

If the taxpayer receives a notification of rejection of this request, they will have the opportunity to challenge the decision (appeal the decision).

How to file Form 8857: Innocent Spouse Relief Claim

There are some steps a taxpayer will need to take when seeking relief. First, they should fill out the form as soon as they know there is a tax liability that belongs to the spouse or ex-spouse. In most cases, the IRS will notify you of this tax liability.

As of July 22, 1998, the taxpayer has two years from the Federal Revenue Agency's notification to submit it. They must submit Form 8857, even if they do not have the necessary documentation. Additionally, as soon as the taxpayer requests an exemption on Form 8857, the spouse or ex-spouse will be notified of the pending request. Taxpayers should also understand that it can take up to six months to get a ruling from the IRS after filing.

When do I file Form 8857 - Innocent Spouse Claim?

When a joint-tax return is filed, the taxpayer and the spouse are jointly and severally liable for all taxes, interest, or fines due on the tax return. If you divorce later, the IRS may still charge you interest and fines from your ex-spouse, even if they had no income when filing the joint return. Form 8857 is sent to the IRS to request that the spouse be exempt from certain interest or fines. For the spouse to receive assistance, they must meet the following conditions:

  • The fee must be for a joint declaration for the year in which they submit the form;

  • The return must contain an underinvestment tax for the omission or misreport of income, deductions, credits, or the basis of the spouse's return.

  • The spouse requesting the exemption must not have known or have no reason to be aware of the tax underestimation;

  • It would be unfair for the spouse to be indebted for the protection of tax understatement, regarding all the facts and circumstances.

Please note that a partial exemption may be granted if the spouse is aware of the omitted or incorrectly reported item, but not in its entirety.

The relief form must be filed within two years of the first IRS collection attempt to be considered, even if you do not have all of the documents or information necessary to prove your case.

Carmen Garcia
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