When love & taxes don’t mix
Innocent Spouse Relief by the IRS May Be An Option
With Valentine’s Day coming up in just a few days, it’s another reminder for married taxpayers about not just the joy of tying the knot but about the responsibilities – and liabilities – you take on when you do.
Once you’re married, filing joint tax returns with your better half can open up a host of tax benefits. But it also exposes you to the liabilities they bring on. Chances are you’ll be paying taxes in a higher bracket, and the financial responsibility borne by one is now shared by both.
So if your Valentine’s Day is ruined by a IRS wage garnishment because of a joint tax return including fraudulent information by your current or former spouse, filing for innocent spouse relief may be an option.
As soon as you learn that you may be on the hook for your spouse’s fraudulent financial activity, it’s recommended you apply for innocent spouse relief by filing IRS form 8857 (you’ll need to attach a personal statement, too).
You’ll need to meet certain conditions, but if you do you can be relieved of the responsibility for paying the taxes, interest and penalties as a result of your spouse including fraudulent tax info in your joint returns. The IRS will do the math for you as to what you owe, or don’t owe.
The IRS mandates that a taxpayer meets all of these conditions (and there are more rules that govern these rules):
- You filed a joint return with your current or former spouse that has an understatement of tax due to false information, such as unreported income or an incorrect deduction, basis or tax credit.
- You didn’t know and had no reason to know that when you signed the joint return that there was an understatement of tax.
- It would be unfair for you to be held liable.
- There were no fraudulent schemes involved
Determining the fairness issue is important. If you received what the IRS deems as a “significant benefit,” then you may still be liable. You’ll want to hire a tax attorney to help make your case to the IRS on that one.
Some Valentine’s Days are better than others. If the spark in your love life is gone because you were unknowingly included your ex’s financial scheme, you may have options that a tax attorney can help you with.
Those who owe back tax debt to the IRS also have options. Even if you think you’re liable for paying that tax debt, the IRS may be willing to hear your case and settle your debt for a fraction of what you owe. If you’re in that situation, give us a call. While we may not be available to carry the heavy grocery bags from the car, you can bet we know how to do the heavy lifting with the IRS.