Tax Tip of the Week: IRS Eliminates Two-Year Time Limit to Claim Innocent Spouse Tax Relief

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Innocent_Spouse_ Married taxpayers have many benefits when filing a joint tax return. But joint filing comes with a catch.  Each spouse is liable, jointly and separately, for any tax, interest, and penalties related to the return.

This liability exists even after a divorce. This means that the IRS will try to collect the full amount due from whichever spouse it can. This is true even if most of the income is attributable to one of the spouses.

Under the innocent spouse rules, an individual may avoid liability for unpaid taxes and penalties, even after signing a joint return, if the following requirements are met:

  • You filed a joint return which has an understatement of income.
  • The understatement of tax is due to erroneous items of your spouse.
  • You are able to establish that at the time the joint return was signed, you did not know and did not have a reason to know that there was an understatement of tax.
  • Taking into account all of the facts and circumstances, it would be unfair to hold you liable for the understatement.

Under the old rules, you must have requested the innocent spouse relief within two years of the IRS started collection efforts. Now the IRS states that it will no longer apply the two-year limit to new requests (IRS Notice 2011-70). A taxpayer whose request was previously denied solely because of the two-year limit may reapply using Form 8857, Request for innocent Spouse Relief, as long as the statute of limitations hasn’t expired for the return in question.

Like any good CPA, I need to add a disclaimer: Unfortunately, it is impossible to offer comprehensive tax info over the Internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.