My former spouse ran up a big tax debt can I get out of it? (Equitable Relief)

My former spouse ran up a big tax debt; is there anything I can do to get out of it. That's actually a three part question, and we're going to deal with one of those parts in this video.

Now, what we're talking about here today is what's called innocent spouse, but more particularly, equitable relief. What does equitable relief mean? Well, equitable relief basically means it would be unfair in order for the taxpayer to have to pay the taxes of the former guilty spouse.

So, there's actually several elements, there's six; I'm going to go ahead and go over those six elements for you so you can understand what you need to do in order to qualify for equitable relief.

The first is you need to know that the tax liability needs to have been filed, or emanated from, what's called a jointly filed return. So you need to have filed a tax return using the married filing joint tax return status for filing status. If you didn't, then there's really no point. You see, if you filed separate, then you already are not liable for the wrongdoings of your spouse because that's exactly why that the married, filing separate filing status exists.

Head of household would be the same thing. If you filed head of household, that means that you're a single parent raising at least one child in the home by yourself, then you also would not be deemed responsible for the wrongdoings of your spouse. So, you need to have filed a jointly filed or married filing joint return.

The second is are you eligible otherwise for innocent spouse relief either under classic innocent spouse relief or what's called separation of liability, and those two issues are actually covered in different videos in this series. I urge you to go ahead and go to the website and check those out.

There's also another aspect to this particular element and that is, are you eligible for relief under community property law in some other way? Now, I'm not going to go ahead and try to recite the community property states; all you need to do in order to find out what states are community property states is go to Google and type in community property states and all 16 will appear on someone else's website. They tend to be out west, with the exception of Louisiana and Wisconsin, and they carry over older or certain elements of Spanish civil law to married couples. So, in some states, particularly out west, you may be eligible for relief under community property law in some regards, and if you were, then this particular aspect of innocent spouse would not be available to you.

Now, the third element is did you file or fail to file your return with the intent to commit fraud. You see, if you intended to commit fraud, then the IRS is not going to give you equitable relief. If they did, that would be actually unfair to the IRS, unfair to the government, and so it stands to reason that if you intended to commit fraud, and I think that that's relatively rare, then you would actually not be eligible for relief under the subsection.

Did you pay the tax - is the next element. If you paid the tax, then the IRS is going to take the position that you've already paid it, it's not something where they're going to refund it because they're not going to take the hit even though the tax has already been paid. So, you're not going to get a windfall for the wrongdoing of your former guilty spouse and I think that that also make sense.

The next element is did you or your spouse (or former spouse) transfer property to one another as part of a fraudulent scheme? I think this sort of piggybacks on the last element that we just talked about, and that is if you were a part of a fraudulent scheme to defraud the government in some way, or to usually convey property; for example, you conveyed property to your Aunt Lillian for $10 (real property meaning real estate for $10), so that you could later apply for innocent spouse relief - no go. The IRS is not going to go for that. That's not going to be something that's going to work in this particular aspect. So, you can't to have been involved in a fraudulent scheme and you can just think of it if I committed fraud, or if I had any part to committing fraud, then I'm not going to get innocent spouse relief. I think that would be a fair way to remember it.

The last element is actually are you able to show that it would be unfair to hold you liable? Now, that's an interesting question. What does that mean? Unfair in this particular instance means that you would be unable to pay. So, the IRS is going to go through a lengthy financial process; they're going to ask you to fill out what's called form 433-A with documentation, and they're going to request that you justify that you have no ability to pay the tax back.

What does that have to do with being unfair? Well, I guess the IRS believes that if you have the money, then it's not unfair.

I don't make the rules folks. I just interpret them.