In Tax Trouble with Your Spouse?

After you say “I Do,” give that sweet kiss, and come back from the honeymoon, you and your spouse will have a whole lifetime together to make money, spend money, and unwillingly give money to the IRS.

But sometimes while love and marriage may bring blissful joy, it can also bring tax trouble if your partner isn’t completely honest with you about finances. That’s because married couples filing joint tax returns are each liable for all taxes owed. Yes, even if one spouse engaged in tax evasion or used questionable tax deductions.

Tax Issues with a Spouse

There are options for taxpayers who are wronged by – and filed joint tax returns with – a shady partner. The IRS has procedures innocent spouses can pursue, and which one to pursue depends on your situation.

Innocent Spouse Relief

First off, there’s what’s called Innocent Spouse Relief. It’ll relieve you of having to pay additional taxes if your partner or former partner engaged in tax evasion (didn’t report all of his or her income), claimed questionable tax credits or deductions, or improperly reported income.

To qualify for Innocent Spouse Relief, you have to have filed a joint tax return with your spouse or ex-spouse that has a tax deficiency solely due to your spouse. It’ll also have to be considered “unfair” to hold you liable for the tax. You’ll have to show that when you signed the joint tax return you had no way of knowing that there was a tax deficiency.

Separation of Liability Relief

The second type of relief that can be sought by wronged spouses is Separation of Liability Relief. Separation of Liability Relief allocates additional tax owed between you and your spouse or ex-spouse. It makes you liable only for the amount you’re allocated. The additional tax has to be due to a misreported item on a joint return that you helped file.

This type of relief also has a few requirements. You’ll have to have filed a joint return, and be either divorced from the other person on the joint return, widowed, or not have been a member of the same household as the other person on the joint tax return for at least a year.

Innocent Spouse Relief and Separation of Liability Relief both have the same requirement. You must apply for relief two years from the IRS’s first attempt to get you to pay the tax.

Equitable Relief

But if you’re in trouble with the tax man because of your current or former spouse, you may be able to pursue what’s called Equitable Relief.

Equitable Relief is an option when you don’t qualify for both of the other options mentioned above. The tax problem must relate to a misreported item on a joint tax return. And that misreported item will have to be due to your spouse.

A wronged taxpayer spouse can also qualify for Equitable Relief if the taxes were calculated correctly, but it wasn’t paid along with the tax return.

But here’s the main kicker for qualifying for Equitable Relief. You’ll have to show that given the entire situation, it’s unfair to make you liable for the tax deficiency. If the situation is that bad, it shouldn’t be hard to show.

Love and Marriage May Bring Tax Trouble. Know Your Options.

While being married can be fun, getting screwed over with tax debt because of a shady spouse isn’t. If that sounds like you, drop us a line so we can help you pursue the right kind of relief.

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