Equitable relief may be available where you fail to qualify for other forms of relief from spousal liability.
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One of the major problems with the old law on spousal liability was that the rules were very mechanical. If you were tripped up by some technicality, there was no way to obtain relief. Changes in 1998 made the law considerably less technical, but the drafters recognized that there could still be situations were the mechanical rules didn’t provide justice. To correct this, they included a rule providing equitable relief.
There are circumstances where relief is not available under either the Innocent Spouse Rule or the Separate Liability Election, yet justice requires that relief be granted. Under the new law, if it’s inequitable to hold you liable for any unpaid tax or any deficiency (or any portion of either), the IRS can excuse you from paying the tax even if you don’t qualify for the other forms of relief.
Note that this provision applies to unpaid tax. The other forms of relief aren’t available if there’s an underpayment on a correct return. If you signed a correct return and your spouse made off with the money that was supposed to be used to pay the tax, you’re out of luck under the other rules. That’s one type of situation where equitable relief would be appropriate. But Congress also made it clear that that isn’t the only type of situation where equitable relief is available. This form of relief is also available to deal with any situation where collecting tax from a spouse would create an injustice.
Applying for Relief
Apply for equitable relief by filing Form 8857, Request for Innocent Spouse Relief with the IRS. (This form is used for equitable relief as well as innocent spouse relief.)