Innocent Spouse Rule

If you sign a joint return, the IRS may be able to collect any tax relating to that return from you — even if your spouse was the one who reported incorrectly.

There are three ways to get out of paying your spouse’s tax. The one described on this page is the innocent spouse rule.

Requirements for relief

You’re eligible for relief if you meet the following conditions, which are discussed in more detail below:

  • You filed a joint return on which there was an understatement of tax due to an erroneous item relating to your spouse.
  • You didn’t know, and had no reason to know, about the understatement when you signed the return.
  • Looking at all the facts and circumstances, it would be unfair to make you pay the tax.
  • You apply for relief under this provision within two years after the IRS begins trying to collect the tax from you.

If you meet all these requirements, then you don’t have to pay the portion of tax that relates to this erroneous item.

Available while still married. Innocent spouse relief may be available even if you’re still married to, and living with, the spouse who should have reported additional tax. If you have assets of your own and want to protect them from collection by the IRS, these rules determine whether you can be held liable.

Erroneous item. Innocent spouse relief applies only to tax liability that arises from an “erroneous item.” That means you can’t use this provision for relief if you sign a correct return and your spouse simply fails to pay the amount shown on the tax return. If your return was correct and your spouse didn’t pay, see Equitable Relief.

Lack of knowledge. This requirement is one of the biggest problems in obtaining innocent spouse relief. You don’t get relief if you knew the return was incorrect — or even if the court thinks you should have known. Some court decisions indicate that you can’t satisfy this condition unless you actually examine the return and ask questions about anything that doesn’t seem right — an unrealistic expectation in many marriages. Sometimes the decisions seem to punish a spouse for being well educated, suggesting that anyone with a good academic background should have identified the problems in the return. This part of the rule is a major source of unfairness, but it remains part of the law. A more favorable “lack of knowledge” requirement applies under the Separate Liability Election.

There was one improvement in this rule when Congress changed the law in 1998. Congress made it clear that if you only knew (or had reason to know) about part of the understatement of tax, you’re only stuck for that part. If you had reason to believe your spouse was cheating to the extent of a few hundred dollars and it turned out to be many thousands, you should only have to pay the smaller amount.

Equitable considerations. This is a provision of prior law that should have been fixed in 1998, but wasn’t. The rule is that you’re eligible for relief only if “taking into account all the facts and circumstances, it is inequitable to hold [you] liable for the deficiency in tax.” The problem with this rule is that the courts sometimes have a strange idea of what is inequitable. Or perhaps more accurately, different judges have different ideas on this count. For example, if the judge feels that you had a high standard of living while your spouse was cheating on taxes, you could be stuck paying the tax bill even though you didn’t know about the cheating and had no reason to know. The judge may think you received a benefit from the cheating in the form of a high lifestyle, so you should pay the tax — as if you should have lived more modestly on the off chance it turned out your spouse was a tax cheat! Our hope is that the courts will interpret this provision more favorably in the future, in light of Congressional intent to provide more generous relief. Only time will tell.

Applying for relief

The IRS won’t automatically grant you relief under this provision, even if you clearly meet all the requirements described above. You have to elect this treatment by filing Form 8857, Request for Innocent Spouse Relief with the IRS.

You can apply for this relief even if you qualify for, and apply for, relief under the Separate Liability Election. Sometimes the relief under this provision is better, as explained below.

Effect of relief

If you qualify for relief under this rule, you’re relieved of liability for tax, interest and penalties relating to the understatement. In most cases this will produce the same result as the separate liability election. But there are circumstances where you might obtain only partial relief under the separate liability election. That would happen if the tax item claimed by your spouse provided a benefit relative to your income. It appears that the rule described on this page provides full relief even in that circumstance. So in some cases you should try to qualify under both rules, and take whichever one provides better relief.

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