Innocent Spouse Relief Rules
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What are some innocent spouse relief rules?
To qualify for innocent spouse relief, you must meet all of the following conditions (also known as IRS innocent spouse rules):
- You must have filed a joint return which has an understatement of tax.
- The understatement of tax must be due to erroneous items caused by your spouse. Erroneous items would be any unrecorded gross income item received by your spouse; and any incorrect deductions, property basis, and/or credits reported on your joint tax return.
- 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. The IRS will determine what a “reasonable person” would believe. If you had any actual knowledge, or a reason to know, about the improper items you would not qualify for the innocent spouse relief. The only exception to this would be if you were involved in a domestic abuse situation.
The “reason to know” determination made by the IRS involves a variety of situations. The nature and amount of the erroneous items will be considered (obviously a larger amount would stick out...and why wouldn't you question that?). The IRS will also review your educational background and business experience. They also will look into your extent, if any, of participating in the activity that results in the erroneous item(s).
The “reason to know” determination is important to the IRS in innocent spouse relief requests since the IRS will try to defeat your claim based on this.
- Taking into account all of the facts and circumstances, it would be unfair to hold you liable for the understatement of tax. This area, also, involves a variety of considerations made by the IRS. They will review whether your spouse deserted you, whether you are divorced or separated, and whether you gained any benefit from the erroneous items.
- You must request your innocent spouse relief using IRS Form 8857.
- You must request relief within 2 years after the date on which the IRS first began collection activity against you
- You must not be involved in an Offer in Compromise payment program with the IRS. The Offer in Compromise program legally closes the tax year that any of your unpaid taxes are applied to. Taxes cannot be re-determined once that happens.