Many married Washington couples choose to file a joint tax return to maximize savings and credits. What many people don't know is that filing a joint return also puts both spouses on the legal hook for the payment all taxes due on the return. Should one spouse improperly, fraudulently or erroneously include inappropriate items in the tax return, the other spouse might find him or herself owing money to state or federal tax authorities. In that scenario, the other spouse - called the "innocent spouse" in tax code parlance - might be able to request and receive relief from the liability usually coming along with the filing of a joint tax return.
Determining Innocent Spouse Status
The IRS looks at several factors when determining whether to grant a request for innocent spouse relief. Among other things, the IRS considers whether the spouse seeking relief is separated or divorced from the other spouse and if economic hardship would result if the requesting spouse is not granted innocent spouse status.
The IRS goes to great lengths to determine whether the person claiming to be an innocent spouse is actually without blame. If the requesting spouse knew or had reason to know of the other spouse's improper actions, the IRS will take that into account and may, on that basis, refuse to grant a request for relief. If the spouses have divorced, the IRS will examine whether the non-requesting spouse is required to pay outstanding tax debts in the divorce agreement or decree. Similarly, the IRS will see whether the innocent spouse was the recipient of a significant benefit from the nonpayment of taxes, in which case the financial boon arising from nonpayment of joint taxes might end up being treated as taxable income in a later tax filing.
The requesting spouse's past compliance with tax laws is also considered. Compliance would indicate the spouse has tried in good faith to act in accordance with the income tax laws.
Some additional factors are not always present in every innocent spouse relief matter, but they can affect the analysis if they are present. They include:
Physical or emotional abuse by the other spouse against the innocent spouse
Poor mental or physical health of the requesting spouse at either the time the joint return was signed or when a petition for innocent spouse relief was filed
Likelihood of Getting Innocent Spouse Relief
In the past, it was much more difficult to get innocent spouse relief, but new guidance from the IRS should make it easier for future filers. Among other things, a recently issued IRS notice stresses the need for tax court judges to decide each application on its merits, using the statutory factors as a starting point. The notice also relaxed the standards by which applicants can prove their eligibility. Washington residents interested in innocent spouse relief should contact a local tax attorney for more information about the process.