The terms “innocent spouse” and “injured spouse” are frequently misunderstood. These are two different situations under our current tax code. A previous blog discussed the concept of an innocent spouse under IRS rules (See Innocent Spouse Relief by John Stancil). An innocent spouse is one who stands has filed a joint return and is exposed to liability for additional taxes due to fraudulent activity on the part of the other spouse. An injured spouse is someone whose refund is captured by the IRS to satisfy a debt owed by the other spouse. An injured spouse claim, if accepted by the IRS, can prevent this from happening. A claim is made by filing Form 8379 with the IRS.
First, some background. When spouses file joint returns, each spouse is liable for anything that is included on the return. In addition, there is joint liability for any omissions from the return. This joint liability exposes both spouses to having the refund seized by the IRS to satisfy a debt owed by the other spouse. This includes taxes, past due child support, or a federal debt such as a student loan. There are two ways to avoid having this happen. Filing a return separate from your spouse will prevent the IRS from seizing your refund for debts of your spouse. However, this may not be the optimal solution, as the filing of separate returns usually results in a higher total tax liability for the family.
The second approach is to make an injured spouse claim. In order to qualify for such a claim six criteria must be met:
1. You must have filed a joint return with your spouse.
2. You must be expecting a tax refund.
3. You must have received notice that the IRS would keep your refund or has already kept the refund.
4. The refund was kept (or is expected to be kept) in order to pay your spouse’s past due tax, child support, or other federal debt.
5. You must have income reported on the joint return.
6. You made and reported payments or withholding from your income on the joint return.
To make an injured spouse claim, you should complete Form 8379 and send it to the IRS Center where you filed the return. Attach copies of Forms W-2 and 1099-R for both spouses to the claim.
If you have not yet filed the return, you can attach Form 8379 to the return. In this case, “Injured Spouse” on the upper right hand corner of page 1 of the 1040.
Part II, Form 8379 lists income and withholding amounts shown on the joint return. These amount are allocated between the spouses. Once the claim for injured spouse relief is submitted and approved by the IRS, the IRS will separate the tax liability and payments for the two spouses. If you have a refund coming, it will be sent to you and not applied to the debts of your spouse. The IRS states that it takes about 11 weeks to process an injured spouse claim. Most states also have injured spouse provisions, so you can check with the Department of Revenue in your state to determine if there is such a statute, and how to file a state claim.
For a discussion of Innocent Spouse, please see my previous blog on TaxConnections.