Posted by UNIVERSAL ACCOUNTING & FINANCIAL SERVICES INC.

Not Eligible for the Innocent Spouse Relief? Try Separation of Liabilities.

Not Eligible for the Innocent Spouse Relief? Try Separation of Liabilities.

By understanding the separation of liabilities, the Internal Revenue Service (IRS) separates the tax liability between you and your ex-spouse or spouse. This includes penalties and interest. You are no longer jointly accountable for the debt. Rather, the IRS allocates the debt based on your responsibility. The IRS will typically assign a tax understatement based on the amount of income and deductions attributed to your income and assets.

You cannot receive a refund with this type of assistance. If you've already paid off your tax debt, there's no way to get it back.


Separate Liability Eligibility Requirements (Section 6015)

To be eligible for separation of liabilities, you must meet the following standards:

  • You filed as married, filing jointly

  • You filed a joint tax return for the year in which you want to share the tax understatement with your ex-spouse.

  • There is an underestimation of tax returns resulting in unpaid taxes.

  • The underestimation of taxes in the joint tax declaration led to the non-payment of taxes.

When you complete Form 8857, you must meet one of the following conditions:

  • You are divorced, legally separated, or widowed

  • According to this rule, if you are a widower, technically, you are no longer married.


Not being a member of a household in the past 12 months

This means that you cannot live in the same residence as the spouse with whom you filed your income tax return at any time during the last 12 months from the day you requested the exemption (complete form 8857). Uncle Sam considers you to be part of the same family if:

  • You live with your spouse in the same house.

  • You or your spouse are only temporarily away from home, and it is reasonable to assume that you will return. For example, if the house is maintained before you or your spouse returns. Examples of temporary absences include prison time, illness, military service, education, vacation, or business.


Reasons IRS Denies Separation of liability request 

Meeting the requirements above does not mean that you will automatically receive the exemption. The IRS will not grant a separation of liability in any of the following situations:

  • The spouse or ex-spouse transferred your property to you to avoid taxes.

  • You and your spouse transferred the property to each other under a fraudulent plan. The fraud does not have to be IRS-related. It could also be to defraud a creditor, business partner, or other parties.

  • The IRS considers that you were aware of the errors on the return when you signed the return. If you have actual knowledge of only one part of an incorrect item, the IRS will not provide separation of liability assistance for that portion of the item.


Factors that the IRS considers to support actual knowledge

The Internal Revenue Service will consider numerous factors to determine if you were aware of the error in the joint tax return when you signed it. This includes:

  • If you have refused or avoided learning about the item to protect yourself from liability.

  • If you or your spouse (or ex-spouse) own the property that resulted in the erroneous item.

When in doubt, it is always a good idea to consult a licensed professional such as UNIVERSAL ACCOUNTING & FINANCIAL SERVICES, INC.


FOR MORE INFORMATION ON HOW WE CAN BEST HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CLICK THE BLUE TAB ON THIS PAGE.


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