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CAUTION: BELOW INFORMATION IS HISTORICAL IRS
INFORMATION. SEE ABOVE LINK FOR VERSION AS OF 9/2004.
Q. What is the effective date of
the new innocent spouse rules under IRC 6015?
A. IRC 6015 innocent spouse rules
are effective for:
- Unpaid balances as of July 22, 1998; and
- Liabilities arising after July 22, 1998
Q. What is joint and several
liability?
A. Many married taxpayers choose
to file a joint tax return because of certain benefits
this filing status allows. Both taxpayers are jointly and
individually responsible for the tax and any interest or
penalty due on the joint return even if they later
divorce. This is true even if a divorce decree states that
a former spouse will be responsible for any amounts due on
previously filed joint returns. One spouse may be held
responsible for all the tax due.
Q. How can I get relief from joint
and several liability?
A. Relief now falls into three
categories: Innocent Spouse Relief; Separation of
Liability; and Equitable Relief. Each of these kinds of
relief has different requirements. They are explained
separately below.
Q. Can both spouses request
relief?
A. Yes, each spouse can file a
Form 8857 to request relief from liability from tax,
interest and penalties.
Q. Does the non-requesting spouse
have any appeal rights?
A. The non-requesting spouse has
no appeal rights, unless that spouse files his/her own
claim. If relief is denied and the requesting spouse
petitions the U.S. Tax Court, the non-requesting spouse,
by law, will be given the opportunity to be a party in
that proceeding.
Q. Will the other spouse be
notified that I filed a claim for innocent spouse relief?
A. The IRS is required to notify
the non-requesting spouse to allow them to participate.
They will also be notified of the determination on your
election although they cannot protest it.
Q. What are the rules for Innocent
Spouse Relief?
A. To qualify for innocent spouse
relief, you must meet all of the following conditions:
- You must have filed a joint return which has an
understatement of tax;
- The understatement of tax must be due to erroneous
items of your spouse;
- You must establish that at the time you signed the
joint return, you did not know, and had no reason to
know, that there was an understatement of tax;
- Taking into account all of the facts and
circumstances, it would be unfair to hold you liable
for the understatement of tax; and
- You must request relief within 2 years after the
date on which the IRS first began collection activity
against you after July 22, 1998
Q. What are erroneous items?
A. Erroneous items are any
deductions, credits, or bases that are incorrectly stated
on the return, and any income that is not reported on the
return.
Q. What is an understatement of
tax?
A. An understatement of tax is
generally the difference between the total amount of tax
that should have been shown on your return and the amount
of tax that was actually shown on your return. For
example, you reported total tax on your 1996 return of
$2,500. IRS determined in an audit of your 1996 return
that the total tax should be $3,000. You have a $500
understatement of tax.
Q. Will I qualify for innocent
spouse relief in any situation where there is an
understatement of tax?
A. No. There are many situations
in which you may owe tax that is related to your spouse,
but not be eligible for innocent spouse relief. For
example, you and your spouse file a joint return that
reports $10,000 of income and deductions, but you knew
that your spouse was not reporting $5,000 of dividends.
You are not eligible for innocent spouse relief when you
have knowledge of the understatement.
Q. What are the rules for
Separation of Liability?
A. Under this type of relief, you
divide (separate) the understatement of tax (plus interest
and penalties) on your joint return between you and your
spouse. The understatement of tax allocated to you is
generally the amount of income and deductions attributable
to your earnings and assets. To qualify for separate
liability, you must have filed a joint return and meet
either of the following requirements at the time you file
Form 8857:
- You are no longer married to, or are legally
separated from, the spouse with whom you filed the
joint return for which you are requesting relief.
(Under this rule, you are no longer married if you are
widowed.)
- You were not a member of the same household as the
spouse with whom you filed the joint return at any
time during the 12 month period ending on the date you
file Form 8857.
Q. Why would a request for
separate liability be denied?
A. Even if you meet the
requirements listed above, a request for separate
liability will not be granted in the following situations:
- The IRS proves that you and your spouse transferred
assets for the main purpose of avoiding payment of
tax.
- The IRS proves that at the time you signed your
joint return, you had actual knowledge that any items
giving rise to the deficiency and allocable to your
spouse were incorrect.
Q. If a husband and wife are still
married but separated for 12 month, prior to filing a
claim for relief due to an involuntary reason such as
incarceration or military duty, can separation of
liability relief be granted?
A. Separation of liability
applies to taxpayers no longer married, separated, or not
living together for a period of 12 or more months
preceding the filing of a claim. A claim can be filed if
any of the three statutory requirements are met.
Q. What are the rules for
Equitable Relief?
A. Equitable relief is only
available if you meet all of the following conditions:
- You do not qualify for innocent spouse relief or the
separation of liability election.
- The IRS determines that it is unfair to hold you
liable for the understatement of tax taking into
account all the facts and circumstances.
- Note: unlike innocent spouse relief or separation of
liability, if you qualify for equitable relief, you
can get relief from an understatement of tax or an
underpayment of tax. (An underpayment of tax is an
amount properly shown on the return, but not paid.)
Q. What Factors are considered in
determining whether or not to grant equitable relief?
A. The following factors will be
considered, but the list is not all-inclusive:
- Current marital status
- Abuse experienced during the marriage
- Reasonable belief, at the time you signed the
return, that the tax was going to be paid
- Current financial hardship
- Underpayment or understatement attributable to the
non requesting spouse
- Lack of significant benefit received by the
requesting spouse
Q. How do state community property
laws affect my ability to qualify for relief?
A. Community property states are
Arizona, California, Idaho, Louisiana, Nevada, New Mexico,
Texas, Washington, and Wisconsin. Generally, community
property laws require you to allocate community income and
expenses equally between both spouses. However, community
property laws are not taken into account in determining
whether an item belongs to you or your spouse (or former
spouse) for purposes of requesting any relief from
liability.
Q. How do I request relief?
A. File Form 8857, Request
for Innocent Spouse Relief, to ask the IRS for
relief. You need not file multiple forms. One form can
cover multiple years.
Q. Should I include a letter when
filing Form 8857?
A. Yes, we request that you
attach a statement to the Form 8857, providing additional
information you wish to be considered.
Q. If I an denied innocent spouse
relief, must I reapply if I believe I might qualify under
one of the other two provisions?
A. No. The IRS automatically will
consider whether any of the other provisions would apply.
Q. I applied for innocent spouse
relief before the law changed (July 22, 1998). Do I need
to reapply?
A. No. The Service will consider
your request under the new law as long as the liability
was unpaid as of July 22, 1998.
Q. Will the IRS deny me relief if
I do not provide them with the information they request?
A. IRS will base their decision
upon all the information available to them. If enough
information is not available, it could adversely affect a
request for relief.
Q. I filed a Form 656, Offer
in Compromise, under doubt as to liability. The IRS
accepted the Offer in Compromise. Can I still apply for
innocent spouse relief?
A. No. We cannot consider your
claim for any year in which an Offer in Compromise was
accepted. Acceptance of an Offer in Compromise
conclusively closes the tax year(s) compromised from any
re-determination of the tax liability.
Q. I signed a closing Agreement,
can I still apply for innocent spouse relief?
A. It depends on the type of
closing agreement you signed.
- If you signed Form 866, Agreement as to Final
Determination of the Tax Liability, the tax year
is closed with finality and you cannot apply for
innocent spouse relief.
- If you signed Form 906, Closing Agreement on
Final Determination Covering Specific Matters,
only those matters covered in the closing agreement
are conclusively closed. Innocent spouse relief may be
requested for matters for covered in the closing
agreement.
Q. When should I file Form 8857?
A. Follow the instructions on
Form 8857.
Q. I am currently undergoing an
examination of my return. How do I request innocent spouse
relief?
A. File Form 8857 with the
employee assigned to examine your return.
Q. What is the IRS has levied my
account for the tax liability and I decide to request
relief?
A. All collection activity is
suspended, regarding the requesting spouse, from the date
the request is received by the Service until a final
determination is made.
Q. What constitutes a collection
activity for purposes of starting the two-year statute of
limitations the cover the filing of Form 8857?
A. A collection activity starts
when the IRS makes an actual levy or seizure, or files a
judicial suit or claim that puts the requesting spouse on
notice the IRS intends to collect the joint tax liability
from specific property belonging to that spouse.
Q. I filed a valid joint return
with my spouse and have an installment agreement to pay
the taxes. Can I still apply for relief?
A. The innocent spouse rules may
apply in your situation. However, regarding the
installment agreement, there are some important
considerations:
- If you do not continue to make payments while we
consider your request for relief, your installment
agreement will default and full payment will be due
immediately if your request for relief is denied.
- If you are granted relief under IRC 6015(b), you
will be entitled to a refund of payments made while we
considered your request.
- If you are granted relief under IRC 6015(c), you
will not be entitled to a refund of any payments made.
- If you are granted relief under 6015(f), you will be
refunded any payments made from the date of your
request for relief.
Q. What is injured spouse relief?
A. Injured spouse relief is
different from innocent spouse relief. When a joint return
is filed and the refund is used to pay one spouse's
past-due child and/or spousal support, a past-due federal
debt, or past-due state income tax, the other spouse may
be considered an injured spouse. The injured spouse can
claim his/her share of the refund using Form 8379, Injured
Spouse Claim and Allocation. To be considered an
injured spouse, you must have:
- filed a joint return;
- received income (such as wages, interest, etc.);
- made tax payments (such as withholding or estimated
tax payments);
- reported the income and tax payments on the joint
return; and
- an overpayment, all or part of which was applied to
the past-due amount of the other spouse.
Q. How can I get more information
about innocent spouse relief?
A. Call the IRS Tax Forms line at
1-800-829-3676 and request Form 8857 and Publication 971, Innocent
Spouse Relief (and other relief for joint filers).
Q. My spouse forged my signature
to a joint return. Am I eligible for innocent spouse
relief? Should I file Form 8857?
A. You are eligible for relief,
but relief does not fall under the innocent spouse rules.
If you can establish your signature was forged, and there
was not tacit (implied) consent, the return is invalid
with respect to you.
Q. What is the meaning of
"undue Hardship" for purposes of equitable
relief of an underpayment of tax liability shown on a tax
return?
A. "Undue hardship"
means significant hardship, i.e., more than an
inconvenience to the taxpayer. It means the taxpayer will
incur substantial personal or financial loss if required
to pay the tax liability.
Q. Will I receive a refund of all
amounts I paid, if relief is granted?
A. It depends upon the provision
under which relief is granted.
- If relief is granted under section 6013(e), refunds
are allowed for amounts paid for the period beginning
two years prior to the date the claim was filed and
ending July 21, 1998.
- If relief is granted under section 6015(b), refunds
are allowable for amounts paid on or after July 22,
1998.
- If relief is granted under section 6015(c), no
refunds are allowable.
- If relief is granted under section 6015(f), refunds
are allowable for amounts paid between July 22, 1998
and April 15, 1999. Refunds are also allowable for
amounts paid after the later of the date the claim was
filed or July 22, 1998 pursuant to an installment
agreement, provided the installment agreement is not
in default.
Q. Will I be granted innocent
relief with respect to unreported income if I feel it is
my accountant's fault that the income was not reported on
the return?
A. Innocent spouse relief is in
no way meant to transfer the claim to an accountant. If
the income was yours (rather than your spouse's), or was
your spouse's but you knew about it, you will probably not
be relieved of liability.
Q. If an understatement is the
result of signing an examination report that lists
omissions of income, does this indicate there was
knowledge of items giving rise to the deficiency?
A. No, innocent spouse provisions
clearly state the knowledge has to do with what was known
at the time the return was signed.
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