When filing a joint income tax return, there is always the risk of the unknown. Regardless of whether you believe your spouse is filing an honest return, it’s important to remember that your signature connects your name to the document. If something is later found to be illegal, misleading, or wrong, the IRS has the ability to come after both people on the jointly filed tax return. However, there is an option to escape liability if you truly had nothing to do with it.
Innocent Spouse Relief
Under the Innocent Spouse Relief program, the IRS grants exemption to innocent spouses whose names are on jointly filed taxed returns that are deemed to be illegal, wrong, or erroneous. If qualified, the innocent spouse may not have to pay any of the taxes, interest, or penalties owed.
Qualifying for Innocent Spouse Relief
In the tax world, innocent tax relief is the closest thing there is to a “get out of jail free” card. But because it is so valuable – and tax evasion is such a serious issue – the IRS does not grant relief without first checking to make sure the “innocent spouse” is actually free of guilt. Here are some of the steps you’ll have to go through to qualify for innocent spouse relief:
- Satisfy IRS requirements – The first step is to satisfy all IRS guidelines and rules. What the IRS wants to make sure of is that you knew nothing about the financial activity of your spouse.
This means you never shared bank account access or had a means of reviewing activity, your spouse had a separate business that operated independently, and you did not knowingly benefit from the surplus income that was available as a result of the manipulation. Ultimately, it comes down to whether you can prove you signed the return without knowing it was wrong and that it would be unfair to hold you responsible.
- Seek timely relief – In addition to the above circumstances, you must file your request within two years after the date on which the IRS began collection efforts. A failure to take action within two years will void your ability to claim innocence. To file, you must fill out a Form 8857.
- Answer the questionnaire – After notifying the IRS of your innocence, they will want to officially record your story to verify its validity. They typically do this by sending a questionnaire. While many of the questions are straightforward, it’s best to have a professional review your answers before submitting. You should always be careful when sharing financial information.
Filing an Innocent Spouse Claim
To file an innocent spouse claim, the IRS asks that you mail or fax the Form 8857. They ask that you do not file it with your tax return or local Tax Court. If using the U.S. Postal Service, it can be mailed to Internal Revenue Service, P.O. Box 120053, Covington, KY 41012. If using a private delivery service, it can be mailed to Internal Revenue Service, 201 W. Rivercenter Blvd., Stop 840F, Covington, KY 41011. If being faxed, it can be sent directly to 855-233-8558.
After the initial Form 8857 filing, it could take up to six months for the IRS to make a determination. They will immediately contact your spouse and notify them of the investigation and will ask for stories from both sides. Even in cases of domestic violence and abuse, the IRS is required to notify the spouse of the investigation. As such, it’s important to weigh all options before filling and seek out appropriate help and protection if needed.
Your spouse will also have the opportunity to file for Innocent Spouse Relief – and it frequently happens. In these situations, the amount of time it takes to reach a verdict may extend beyond the typical six month timetable. Because both spouses often file, it’s important to gather all the facts and details before making a decision. In the end, all of the facts will be uncovered, and the truth is almost always found.
If you believe your spouse has cheated on your jointly filed tax return, you may want to consider filing for innocent spouse relief. However, if you choose to do so, make sure you are prepared by seeking out the help of a tax professional. A tax professional can guide you through the process, protect your interests, and ensure you are given fair treatment. It’s never a good idea to go through the tax relief process on your own.