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Filing a joint tax return when a partner has back taxes

innocent spouse relief

Getting married means that you will share your life with your spouse in a lot of ways including your finances. With that being said, it is not uncommon to find spouses that did not talk about their finances before saying ‘I do’. This may bring about some unprecedented problems such as finding out that your partner owes back taxes. In most cases, you will still be liable for these back taxes too even if they were incurred before your marriage and you currently file joint returns. While this may seem unfair, the IRS has instituted a couple of options and tax reliefs to help spouses deal with their partner’s tax reliefs. Here are some of the options and tax reliefs that you can claim if your partner owes the IRS back taxes. But first.

Do you know where the tax debt is coming from?

Tax arrears and debt are not romantic things that spouses want to discuss, especially before marriage. However, it is imperative for marriage partners to understand each other’s financial situation. Is the debt from late child support payments? Is your spouse late in making student debt payment? Regardless of the reason or whether you are responsible for your spouse’s debt, the IRS views the joint return as a fair game. This means that once each of you signs a joint return, you are both responsible for any tax, interest or even penalty incurred by the other spouse. What can you do when you realize that your spouse owes the IRS when you file joint tax returns?

Innocent spouse relief

Albeit unpopular, this is one of the ways that a spouse can gain full tax forgiveness from the tax man. To get innocent spouse relief, you need to prove to the IRS that your partner incurred the tax debt in question without your knowledge. Tax debt, in this case, can come from different circumstances. For examples, failure of your spouse to report income. Underreporting income or even claiming deductions and credits fraudulently can also land you in trouble with the IRS, even if you had no clue that your spouse was doing it.

It is, however, worth noting that filing for innocent spouse relief is not just a matter of claiming that you had no idea about your spouse’s tax issues. First, you will have to fill out IRS Form 8857- Request for Innocent Spouse Relief. However, it is important to be honest when completing the form since any dishonesty can land you a perjury charge. Working with your tax defense attorney is highly advisable when you wish to seek innocent spouse relief. Once you have completed the form, the IRS will have to contact your spouse or ex-spouse in the event that they need any relevant information.

You will not qualify for any spouse relief if the government learns that you had some prior knowledge of the tax issue when signing the joint return. If the IRS finds that you did, in fact, have no knowledge of the tax debt, then you will be eligible for full tax amnesty on all tax debt owed. The innocent spouse relief applies for self-employed taxes and individual income taxes.

Separation of liability

This form of relief is only available for any tax debt or liabilities that arise from understatement and underpayment of the taxes in question. In this case, you will be separating any understatement of tax including penalties and interest between you and your spouse if you filed joint taxes. Once you allocate the tax debt, you will only be responsible for the tax that you owe. Like the previous relief, this also comes with a number of rules and conditions. These include;

  • One can only file for separation of liability if you are legally separated or no longer married to your spouse with whom you filed jointly.
  • Separation of liability is only possible if you are widowed.
  • You cannot have lived in the same household with your spouse at any time in the last 12 months before filing for the relief.

Equitable relief

This is another relief that you can get if you do not happen to qualify for other options. Once the IRS determines that you are not eligible for innocent spouse relief and separation of liability, they may propose the equitable relief. In this case, the government will offer equitable relief after denying you the other types of reliefs. However, with this option, you can get the relief from an understatement or underpayment even if you had knowledge of the crime.

Equitable relief considers the circumstances surrounding your back taxes to decide whether the government should grant you relief. For example, if your spouse understates your taxes and you fear any form of abuse in the event that you challenge the items on the return then the IRS can grant you relief.

Injured spouse relief

This is different from innocent spouse relief in that the IRS will give you the injured spouse relief if someone took money belonging to you. Instead of committing a wrongdoing on a joint return that you did not know about, the injured spouse relief applies to when the US Treasury Department takes part or all of your joint refund. These are some of the debts that the Treasury Department Offset Program collects:

  • Past-due state and federal taxes
  • Late alimony
  • Late child support
  • Overdue student loans

You can recover the share of your refund if you discover that a part or all of your joint refund money will be taken by the US treasury department due to the back taxes of your spouse. To apply for this, you will need to file Form 8379-Injured Spouse Allocation. While you can file a form for each tax year that your tax refund was impacted, you only have 3 years from the due date of the original return.

Conclusion

Many people believe the IRS is unreasonable when it comes to payment of taxes and imposing penalties. However, procuring the services of a tax defense attorney can save you a lot of grief. If you are filing a joint return and had no idea about the back taxes of your spouse, you can file for innocent spouse relief or separation of liability. If these are declined then the IRS may consider equitable relief or injured spouse relief.

 

If you need help or advice about filing for innocent spouse relief (or if you just have tax questions in general), call the highly skilled and experienced attorneys at Ayar Law for free, no-obligation advice.  800.571.7175

 

 

 

 

 

 

 

 

 

 

 

 

Venar Ayar, Esq.

Venar Ayar, Esq.

Attorney-at-Law, Master of Laws in Taxation
Principal and founder, Ayar Law

Venar is an award-winning tax attorney ranked as a Top Lawyer in the field of Tax Law. Mr. Ayar has a Master of Laws in Taxation – the highest degree available in tax, held by only a small number of the country’s attorneys.