Spouses being held liable for their partner’s tax liabilities have given rise to two separate and unique types of relief by legislation and the IRS. These are often confused and misunderstood. We will define both Innocent and Injured Spouses, determine how to qualify for the different types of relief, discuss timing options, and review recent legislation and court cases.
When a couple files a joint tax return they are agreeing that everything on that tax return is true and they are responsible for everything on the return. This is known as joint and several liability, (§ Cod. Sec. 6013(d)(3)) which means that both parties are totally responsible for all of the tax liability on the return both together and separately.
Traditionally, an Innocent Spouse is someone who meets all of the following qualifications under Cod. Sec. 6015(b):
1. The tax return in question must have been a joint return
2. An understatement of tax resulted from erroneous tax items attributable to the non-requesting spouse
3. The requesting spouse did not know or have reason to know of the understatement when the return was signed (T.C. Memo 2009-137)
4. The requesting spouse did not substantially benefit from the understatement
5. The requesting spouse makes the request not later than 2 years after the date collection activities began
Next up, two more kinds of Innocent Spouse treatment.