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Tax Liability and “Innocent Spouses”

Posted by HomeWork Solutions on Sep 12, 2019 10:00:00 AM
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innocent spouses

Generally speaking, couples filing jointly are also jointly responsible for the tax obligation of their household. This means that the IRS can go after either spouse for the entire tax obligation, not just the part associated with their earnings. One exception to this rule is called an “Innocent Spouse.”

What is an innocent spouse?

An innocent spouse is someone who is genuinely unaware of the other spouse’s tax understatement.

To claim this protection, the innocent spouse must prove that they did not know of the tax understatement and that there was nothing that should have caused suspicion. They also must prove that the tax obligation is such that it would be inequitable to hold them liable.

Any spouse can claim this exemption even if they are still living with the other spouse in question.

Allocation of liability

In these situations the IRS allocates the tax liability as though separate filings were made. You are still liable for tax owed on your earnings, just not the problems of the other spouse.

If the IRS can prove you knew about the tax understatement when you signed the return, your protection goes away; unless you can prove you signed the return under duress.

“Injured” spouse

An injured spouse is another potential option for joint filers. In this case, if a joint tax refund is applied to one spouse’s past debts (back taxes, student loans, child support, etc.) the non-debt holding spouse can file to have the IRS split the refund and protect their portion of the refund from their spouse’s debts.

As with anything tax or IRS related there are specific forms to be used and deadlines to be met. Ask a personal tax accountant for help in managing these special situations.

Topics: nanny, agency, CPA

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