Filing a joint tax return can create problems you may not expect, particularly when one spouse has unpaid taxes or the return contains errors you did not know about. The IRS generally holds both spouses responsible for taxes reported on a joint return. Still, certain forms of spouse relief may limit that responsibility or allow you to recover your share of a tax refund.
If you are dealing with a joint tax problem in Frederick, Gabaie & Associates, LLC can help you determine whether you may qualify for injured spouse relief, innocent spouse relief, or another tax resolution option.
Call (410) 358-1500 or contact us to discuss your situation.
What Is Injured Spouse Relief?
Injured spouse relief can help you recover your share of a federal tax refund when the IRS or another government agency applies all or part of a joint refund to a debt that belongs to your spouse.
For example, you and your spouse file a joint return and are entitled to a $5,000 refund. Your spouse has a past-due federal tax debt, child support obligation, or another qualifying debt. The government applies the refund to that obligation.
You may be able to claim your portion of the refund rather than losing the entire amount to your spouse’s debt.
The IRS refers to this process as an injured spouse allocation. To request it, you generally file Form 8379, Injured Spouse Allocation. The form allows the IRS to determine how much of the joint refund belongs to each spouse.
Injured spouse relief is different from innocent spouse relief. The terms sound similar, but they address different problems.
What Is Innocent Spouse Relief?
Innocent spouse relief may apply when you filed a joint tax return, and the IRS later determines that additional tax is owed because of an error or omission attributable to your spouse or former spouse.
Joint filing generally means both spouses can be held responsible for the full tax liability. That can remain true even after divorce or separation. A divorce agreement stating that your former spouse will pay a tax debt does not necessarily prevent the IRS from collecting from you.
Depending on the circumstances, however, you may qualify for relief from some or all of the liability.
The IRS recognizes three forms of relief for certain joint filers:
- Innocent spouse relief
- Separation of liability relief
- Equitable relief
These options have different eligibility requirements. You generally request them using Form 8857, Request for Innocent Spouse Relief.
What Is the Difference Between Injured and Innocent Spouse Relief?
The simplest way to think about the distinction is this:
Injured spouse relief concerns a tax refund. Innocent spouse relief concerns a tax liability.
With injured spouse relief, you generally agree that the joint tax return resulted in a refund, but you believe your share should not have been used to pay your spouse’s separate debt.
With innocent spouse relief, you are asking the IRS to relieve you from responsibility for tax that resulted from your spouse’s erroneous or unreported items on a joint return.
For example, if your spouse failed to report income and the IRS later assesses additional tax, innocent spouse relief may be relevant. If you and your spouse are due a refund but your spouse owes qualifying past-due debts, injured spouse relief may be the appropriate issue.
Who May Qualify for Injured Spouse Relief?
You may have a claim for injured spouse relief if you filed a joint return and part or all of the resulting overpayment was, or is expected to be, applied to your spouse’s legally enforceable past-due obligation.
Qualifying debts can include certain:
- Federal tax debts
- State income tax debts
- State unemployment compensation debts
- Child support obligations
- Spousal support obligations
- Federal nontax debts, such as certain student loans
You generally must also have reported income, made tax payments, or otherwise have a basis for claiming a share of the refund.
The fact that your spouse owes money does not automatically mean you lose your share of a joint refund. The IRS uses the information you provide to determine each spouse’s share.
How Do You Claim Injured Spouse Relief?
You generally claim injured spouse relief by filing Form 8379, Injured Spouse Allocation. You may file the form with your joint tax return or separately after learning that your refund was applied to a qualifying debt. A separate Form 8379 is generally required for each tax year for which you are seeking relief.
The IRS may require information from the joint return, including income, withholding, credits, and other tax payments, to determine each spouse’s share.
Timing matters. The IRS generally requires Form 8379 to be filed within three years from the date the return was filed or two years from the date the tax was paid, whichever is later, subject to specific rules and exceptions.
If you received a notice that your joint refund was offset, it is worth reviewing the notice and the underlying debt promptly rather than assuming the entire refund is gone.
What Are the Three Types of Innocent Spouse Relief?
The IRS recognizes several forms of relief for taxpayers who are jointly liable for tax debt. The circumstances of your case determine which option may apply.
Innocent Spouse Relief
Traditional innocent spouse relief may apply when your joint return understated the tax you owed because of an error or omission by your spouse. You generally must show that you did not know, and had no reason to know, about the understatement when you signed the return and that holding you responsible would be unfair.
For example, your spouse may have failed to report income or claimed a deduction or credit that was not allowed. If you did not know about the error and meet the other requirements, you may be able to request relief from the resulting tax liability.
The IRS considers the facts and circumstances of each case. Knowledge of an error does not necessarily end the inquiry in every situation. In some cases, partial relief may be available if you knew about an item but not the full extent of the resulting tax understatement.
Separation of Liability Relief
Separation of liability relief may allow certain taxpayers who are divorced, legally separated, or no longer living with their spouse to have an understated tax divided between the spouses.
Instead of treating both spouses as responsible for the entire understatement, the IRS may allocate the liability between them based on the applicable rules. This can be particularly relevant when a former spouse’s income, deductions, or credits caused part of the tax problem.
Eligibility is not automatic simply because a couple is divorced. The specific circumstances surrounding the joint return and the taxpayer’s current relationship with the former spouse matter.
Equitable Relief
Equitable relief can provide another avenue when a taxpayer does not qualify for traditional innocent spouse or separation of liability relief.
This form of relief may apply when it would be unfair to hold you responsible for an understated or unpaid tax based on all of the circumstances. It can be especially important in situations involving a properly reported tax liability that was never paid.
The IRS considers a range of factors when evaluating equitable relief. The circumstances surrounding the marriage, financial situation, knowledge of the tax problem, and other facts may all matter.
What If I Did Not Know My Spouse Made a Mistake on Our Tax Return?
Lack of knowledge can be important in an innocent spouse case, but it is not the only requirement.
The IRS looks at whether you knew or had reason to know about the erroneous item when you signed the joint return. For example, you may face questions about whether you should reasonably have known that your spouse failed to report income or claimed an improper deduction.
The IRS also recognizes that some taxpayers may have been unable to question information on a return because of abuse, threats, or financial control. In qualifying circumstances, those facts may affect the IRS’s analysis of whether relief should be granted.
Injured and Innocent Spouse Relief FAQs
What is the difference between injured spouse and innocent spouse relief?
Injured spouse relief generally concerns your share of a joint tax refund that was applied to a debt owed by your spouse. Innocent spouse relief concerns responsibility for certain tax liabilities arising from a joint return.
Can I request innocent spouse relief after a divorce?
Yes. Divorce does not automatically eliminate joint tax liability. In fact, divorce or legal separation may be relevant to whether you qualify for separation of liability relief.
How long do I have to request innocent spouse relief?
Deadlines depend on the type of relief and circumstances of the case. For traditional innocent spouse and separation of liability relief, the IRS generally requires a request within two years after it begins collection activity against you, subject to applicable rules and exceptions.
Get Help With Injured or Innocent Spouse Relief in Frederick
A joint tax return does not always mean you have to accept responsibility for a tax problem caused by your spouse, nor does your spouse’s debt necessarily mean you must give up your share of a joint refund.
Gabaie & Associates can review your circumstances and help determine whether injured spouse relief, innocent spouse relief, separation of liability, equitable relief, or another tax resolution strategy may be appropriate.
Are you dealing with a joint tax problem in Frederick? Call Gabaie & Associates at (410) 358-1500 or contact the firm online to discuss your options.
