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Tag Archive for Injured spouse

Injured Spouse Allocation

Many married taxpayers choose to file a joint tax return because of the benefits to be derived from this filing status. On a joint return, both taxpayers are jointly and individually responsible for the tax and any interest or penalty due on the return, even if they later divorce. This is true even if a divorce decree should state that your former spouse will be solely responsible for any amounts due on previously filed joint returns.

The situation can exist, then, where one spouse could be held responsible for all the tax due, even if all the income was earned by the other spouse. In cases like this, the IRS, in the interest of equity may allow a spouse in such a situation to be relieved of the tax, interest, and penalties that are due. Read more

“I” is for Innocent / Injured Spouse

TaxConnections Picture - His Hers“I” is for Innocent and Injured Spouse.  The Innocent Spouse program and the Injured Spouse program are similar but different ways for spouses to keep their tax situation separate from each other.  Trust me when I say you don’t want to be involved in these.  It can be a messy, complicated, time consuming process to reach a fair conclusion. It is much better if you don’t need to avail yourself of the Innocent or Injured Spouse provisions. The next post is “J for Joint Liability”; I suggest you read that one as well.

Innocent Spouse relief is when one spouse thinks they should be absolved of the joint tax liability.  These are extreme situations and many times involve an ugly divorce.  One example the Internal Revenue Service gives is a couple files a return owing $5,000 then get divorced.  The tax bill wasn’t paid and part of the divorce declares the spouses will split the tax.  If one spouse gives the other $2,500 but the other spouse never remits anything to the IRS, this would be a situation where the spouse who did provide their $2,500 should be allowed to be released from the tax debt.  Most situations are much trickier and difficult on both parties.  It can take months or years to get it resolved, but it does provide at least the chance to make things right.

Injured Spouse Relief is a much easier concept to understand and to implement.  If one spouse has prior tax debts or child support liabilities, there are two ways to keep the current year taxes separate.  The couple can file two separate returns but that is normally a tax disadvantage and more work, so enter the Injured Spouse Relief.  If you include Form 8379 with a joint return, the IRS calculates the current year refund for each spouse.  Instead of a joint refund of $8,000 all being taken by the IRS and applied to prior liabilities for one spouse, Form 8379 allows the IRS to calculate the refund attributable to each spouse.  If the spouse with no outstanding liabilities would have a refund based on their own income and their own payments, that spouse will receive a check for their portion of the refund while the remainder is applied against the one spouse’s prior liabilities. Read more