Innocent spouse relief is a very important provision of law under IRC that protect a person in a marriage from charges of wrongdoing when he/she may not be responsible for any tax evasion or wrong doing in a jointly filed taxx return. We all know that in case of joint tax return , there is a concept, known as “joint and several liability,” can sometimes be burdensome if one spouse is found to be at fault for tax misstatements or omissions. In such cases, the other spouse, if proven to be unaware of the discrepancies, may seek what is known as ‘innocent spouse relief.’ Let’s explore this critical tax provision in detail.
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Video Summary on Innocent spouse tax relief
What is Innocent Spouse Relief?
Innocent spouse tax relief is a provision of the Internal Revenue Code (IRC), specifically under section 6015, that allows one spouse to request relief from the tax liability resulting from incorrect items on a jointly filed tax return if they were unaware of the errors.
Why is Innocent Spouse Relief Important?
This relief serves as a financial lifeline to individuals who were unknowingly subjected to a tax burden caused by the inaccurate or fraudulent actions of their spouse or former spouse. Without this relief, they could be held accountable for the entire tax debt plus any interest and penalties, despite not being responsible for the misstatements or omissions.
When Can You Apply for Innocent Spouse Relief?
The IRS has set a specific time limit for requesting innocent spouse relief. The request must be filed within two years after the IRS first attempted to collect your tax. However, if you’re seeking relief via “equitable relief,” a different set of rules may apply.
What is Equitable Relief ?
Equitable relief is a type of relief or remedy provided by a court that involves actions rather than monetary compensation. It is typically awarded when damages would be inadequate or impractical.
In the context of taxes, particularly under IRS innocent spouse rules, equitable relief can be granted when a taxpayer doesn’t qualify for innocent spouse relief or separation of liability relief for something on their joint tax return. If something isn’t fair and equitable considering all the facts and circumstances, the IRS may grant relief to the innocent spouse.
It’s designed for specific situations where, even though the tax law technically supports the liability claim by the IRS, existing circumstances make it unfair to hold the innocent spouse liable for the tax debt.
How to Apply for Innocent Spouse Relief?
Applying for innocent spouse relief requires completing an IRS Form 8857, “Request for Innocent Spouse Relief”. This form must be completed accurately, providing comprehensive details about your situation. Documentation to support your claims is often necessary, so it’s beneficial to consult with a tax professional during this process.
Where Does Innocent Spouse Relief Apply?
Innocent spouse relief applies when a joint tax return is filed. This can include instances when a spouse or former spouse failed to report income, misreported income, or claimed improper deductions or credits. It’s important to note that this relief only applies to individual income and self-employment taxes. It does not provide relief for unpaid child support, federal student loans, state taxes, or any other type of federal debt other than federal income tax liability.
Conclusion
Innocent spouse relief represents an important measure that can protect individuals from the unfair burden of a spouse’s or former spouse’s erroneous or fraudulent tax reporting. Given the complexities and stringent criteria of this provision, it’s always advisable to seek help from a qualified tax attorney or tax professional when navigating this process. Remember, the goal of the tax code is fairness, and innocent spouse relief is one way the IRS seeks to uphold this principle.
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