An Injured Spouse is a spouse who has had part or all of their refund seized due to the debt owed by the non-injured spouse. In order to qualify as an Injured Spouse a taxpayer must meet the following qualifications:
1. File a joint tax return with the non-injured spouse.
2. Have had, or suspect you will have, part or all of your portion of the refund seized due to the other spouses back debts.
3. Not be obligated to pay the other spouses back debts.
4. Have received income reported on the joint return.
5. Have made tax payments or claimed a refundable credit on the joint return
6. File a Form 8379, Injured Spouse Claim and Allocation.
There are currently nine states that have community property laws. Every states specifics are slightly different, some more or less stringent then others. For the most part, from an income tax standpoint, community property laws mean that anything earned or purchased while the “community” or marriage was intact is split 50/50. When seeking Injured Spouse relief in a Community property state, you should research that state’s specific laws.
An Injured Spouse who falls under Community Property laws may qualify for relief under the same standards of Equitable Relief for Innocent Spouses listed above in certain cases. Further research can be done under Cod. Sec. 66.
While the IRC does not specifically address appeal and judicial review procedures for Injured Spouse claim denials as it does for Innocent Spouse claims, in 865 F. Supp 216, Yvonne M. WADE, Plaintiff, v. UNITED STATES of America, Defendant. Civ. No. 93-914 (HLS), the court allowed the timely appeal of the dis-allowance of a Form 8379 as the primary standard for the request of legal fees incurred during the appeal under Cod. Sec. 7430.
What this means is that is an Injured Spouse claim is denied the taxpayer should fall back to the rules governing CAP and CDP appeals.
When dealing with an Innocent/Injured Spouse claim the big factors are to determine which statute the taxpayer falls under and pursue the claim under those requirements. While the statutes are similar, they are each specific in their determinations and must be figured separately.
You must make sure you assist your client in making the right decisions as they can have long-term effects and making the wrong choice can effect appeals and judicial review.