Yes. If you’re married, you can either file your taxes separately or jointly. If you file joint returns with your spouse, you become jointly and severally liable for any tax deficiencies, interests, or penalties, even if the deficiencies are attributable to the income from one spouse. However, one spouse can request what’s known as “innocent spouse relief” from the Internal Revenue Service.
What is “Innocent Spouse Relief”?
Innocent Spouse Relief is an exception in the tax code. If granted, it can relieve a spouse of responsibility for paying tax, interest, and penalties if your spouse (or former spouse) improperly reported items or omitted items on your tax return. In that regard, the tax, interest, and penalties can only be collected from your spouse.
How Can I Qualify for Innocent Spouse Relief?
In order to qualify for innocent spouse relief, you must meet all of the following criteria:
- You filed a joint return which has an understatement of tax due to erroneous items of your spouse;
- You can demonstrate that at the time you signed the joint return, you did not know, and had no reason to know, that there was an understatement of tax;
- Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax; and
- You and your spouse have not transferred property to one another as part of a fraudulent scheme.
- A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, ex-spouse, or business party.
What are “Erroneous Items”?
The IRS defines “erroneous items” as the following:
- Unreported Income: You have the responsibility to report all income, including earnings, gifts, property, etc. Any gross income item received by your spouse that is not reported is considered unreported income.
- Incorrect Deduction, Credit or Basis: Any improper deduction, credit or property basis claimed by your spouse is an erroneous item.
How Can I Demonstrate I Did Not Have Knowledge of An Understatement Tax?
The IRS considers that you knew or had reason to know of an understatement tax if you actually knew of the understatement, or if a reasonable person in similar circumstances would have known the understatement.
For example, if your spouse tells you that he or she is underreporting your income before filing, then you have actual knowledge of the understatement.
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Can I Be Given Innocent Spouse Relief if I Filed My Tax Returns Separately?
No. Innocent spouse relief only applies for married couples who jointly file their tax returns because it demonstrates that one spouse was innocent to the understatement tax and therefore should not be penalized.
If you file your taxes separately and understate your tax due, you alone will be held liable for any tax deficiencies, interests, or penalties.
Should I Seek Legal Advice for My Tax Problems?
Tax laws are complex and ever-changing. It's important to speak to an accountant or file your taxes if you realize that your spouse did not file. But, if you get a notification from the IRS about any back taxes and/or penalties, and you believe you qualify for innocent spouse relief, then contact a local tax attorney. It's important that you take steps to remedy the situation, as soon as possible, as a tax attorney cannot help you until you take the first steps.