IRS Innocent Spouse Relief: When You're Not Liable

Innocent spouse relief is an IRS program that can remove your responsibility for paying additional taxes, penalties, and interest when your spouse or former spouse understated the taxes owed on a joint return without your knowledge. According to the IRS, when you file a joint tax return, both spouses are jointly and severally liable for the full tax amount, which means the IRS can collect the entire balance from either spouse, even after a divorce. Innocent spouse relief is an exception to that rule for spouses who did not know about or benefit from the errors on the return.

According to the IRS, innocent spouse relief applies only to taxes due on your spouse's income from employment or self-employment. It does not cover taxes on your own income, household employment taxes, business taxes, or trust fund recovery penalties. The relief is available whether you are still married, separated, or divorced.

The Three Types Of Innocent Spouse Relief

The IRS evaluates three forms of relief when you file a request, and you do not need to specify which type applies to your situation because the IRS will automatically consider all three.

Innocent Spouse Relief

This is the primary form of relief, available when your joint return understated the tax due because of errors attributable to your spouse, and you did not know or have reason to know about those errors. According to the IRS, errors that qualify include unreported income, incorrect deductions or credits, and incorrect asset values. The IRS considers whether a reasonable person in your circumstances would have known about the errors and whether you received any financial benefit from the understated income.

Separation Of Liability Relief

This form of relief divides the understated tax, penalties, and interest between you and your spouse based on each person's share of the errors. According to the IRS, you are generally eligible if you are divorced, legally separated, or have not lived with your spouse for at least 12 months before filing the request. You must also demonstrate that you did not know about the errors when you signed the return.

Equitable Relief

If you do not qualify for innocent spouse relief or separation of liability, the IRS may grant equitable relief if holding you responsible for the tax debt would be unfair given all the facts and circumstances. According to the IRS, equitable relief considers factors including your current marital status, whether you suffered economic hardship, whether you knew or had reason to know about the understated tax, and whether you were a victim of domestic abuse that affected your ability to challenge the return.

Who Qualifies For Innocent Spouse Relief

To be eligible, you must have filed a joint return that understated the tax due because of errors attributable to your spouse, and you must not have known or had reason to know about those errors when you signed the return. According to the IRS, you are not eligible in any year where you signed an Offer in Compromise with the IRS, signed a closing agreement covering the same taxes, or a court has already issued a final decision denying you relief.

Victims of domestic abuse receive a special exception. According to the IRS, you may still qualify for relief even if you had some knowledge of the errors if you signed the return because of spousal abuse, threats, or coercion and were afraid to challenge the items on the return.

The IRS approval rate for innocent spouse relief is relatively low. According to Jackson Hewitt, the IRS received over 26,000 requests in a recent year and fully approved fewer than 5,000. The fact-based, case-by-case nature of the evaluation means that the strength of your documentation and the clarity of your explanation are critical to the outcome.

How To Apply For Innocent Spouse Relief

To request relief, file Form 8857, Request for Innocent Spouse Relief, with the IRS. According to the IRS, Form 8857 covers all three types of relief (innocent spouse, separation of liability, and equitable), so you do not need to determine which type fits your situation. The IRS will evaluate your information and apply the appropriate form of relief if you qualify.

Form 8857 is a seven-page form that requires detailed information about your tax situation, your relationship with your spouse, your knowledge of the return's contents, and your financial circumstances. You should include supporting documentation such as divorce decrees, court orders, financial records, and any correspondence that demonstrates you did not know about the errors. According to the IRS, you must file the request within two years of receiving an IRS notice of an audit or additional taxes due because of an error on your return.

While your request is being reviewed, continue to file your tax returns and pay any taxes you owe. If you received an IRS notice about a balance and cannot pay while the review is pending, you may be able to set up an installment agreement to manage the amount in the meantime.

Innocent Spouse vs Injured Spouse

Innocent spouse relief and injured spouse relief are two separate IRS programs that address different problems. They are frequently confused because of their similar names, but they apply in entirely different situations.

• Innocent spouse relief removes your liability for tax debt caused by your spouse's errors or omissions on a joint return. It addresses the underlying tax, penalties, and interest.
• Injured spouse relief protects your share of a joint tax refund from being applied to your spouse's past-due debts such as student loans, child support, or state taxes. It does not address tax liability at all. You request injured spouse relief by filing Form 8379.

If you owe the IRS because of your spouse's errors, you need innocent spouse relief (Form 8857). If your refund was taken to pay your spouse's separate debts, you need injured spouse relief (Form 8379).

What Happens After You Apply

After you submit Form 8857, the IRS will notify your current or former spouse that you filed a request, which allows them to participate in the review process. According to the IRS, the review can take six months or longer. When the review is complete, the IRS sends a letter of determination with its decision. If approved, the IRS removes your responsibility for the additional tax, penalties, and interest attributable to your spouse's actions.

If the IRS denies your request, both spouses have the right to appeal within 30 days of the determination letter. You can file Form 12509, Statement of Disagreement, and request a review by the IRS Independent Office of Appeals. If you cannot reach agreement through Appeals, you can petition the U.S. Tax Court. Taxpayers exploring other ways to resolve joint tax debt beyond innocent spouse relief can review the full range of IRS resolution options available for balances you cannot pay.

Frequently Asked Questions

Do I Have To Be Divorced To Qualify?

No, you do not have to be divorced to qualify for innocent spouse relief. According to the IRS, the relief is available whether you are married, separated, or divorced. However, separation of liability relief specifically requires that you are divorced, legally separated, or have not lived with your spouse for at least 12 months.

Will My Spouse Be Notified?

Yes, the IRS is required to notify your current or former spouse when you file Form 8857. According to the IRS, the other spouse has the right to participate in the review process and can appeal the decision if relief is granted.

What If I Knew About Some But Not All Of The Errors?

The IRS evaluates each item on the return separately, so you may receive partial relief for items you did not know about while remaining liable for items you were aware of. According to the IRS, the determination depends on whether a reasonable person in your situation would have known about each specific error.

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