What we’re talking about here is actually Innocent Spouse Relief and it’s important to note that innocent spouse is not the same thing as injured spouse. Innocent spouse – and we’re going in into detail today here – but injured spouse is actually the situation where you have a husband and wife that one of the spouses has a tax bill and the other does not and so, when they file a joint return, subsequently, there’s a spouse that has at least some portion of their share of their tax refund withheld by the government and applied to the so-called guilty spouse’s liability. That’s injured spouse. There’s actually a way to go ahead and get the proportionate share of the injured spouse tax refund back. One of the things you can do is Google the term “injured spouse” or you can go ahead and go to our website at GetIRShelp.com for more information about that.
But what we’re talking about here is actually innocent spouse. There is actually three types of innocent spouse. There’s something that I call a classic innocent spouse, there’s also something called the separate liability election, and there’s something called equitable relief. I’m going to go and briefly talk about each one of these.
Classic innocent spouse is a situation where you have what I like to call guilty spouse that is actually perpetrating some sort of fraud upon the innocent spouse, the spouse the doesn’t have anything to do with the tax liability. And typically, what it is is you have the guilty spouse, who is either lying to the innocent spouse and telling them that there are no tax liabilities and sometimes providing false tax returns for the innocent spouse to sign, or sometimes actually fraudulently forging the innocent spouse’s name on the tax return itself. Now, classic innocent spouse, the actual parameters are fairly tight, fairly narrow; the innocent spouse in the situation cannot have benefited from the actions or the lifestyle of the guilty spouse, and so it’s pretty rare.
The second one is called the separate liability election. Separate liability election is where you’ve had joint tax returns filed in the past and all you’re actually asking the government to do is to break that one jointly filed return into two separate returns and then you would pay your proportionate fair share of the tax. Pretty good deal, especially where you have one spouse (the guilty spouse) that was self-employed and therefore, racking up a huge tax liability and perhaps the innocent spouse in the situation had a wage earner type job and had adequate withholding. That would be a very classic sort of separate liability election type of case.
There’s one last type of innocent spouse case, it’s called equitable relief. It is a situation where everything notwithstanding, it’s just still not fair to hold the innocent spouse liable for the taxes of the guilty spouse. It’s a situation where you can demonstrate to the government that it would constitute an economic hardship to the innocent spouse to go ahead and be forced to pay the tax. Pretty rare, I would suggest, but sometimes a solution. Also, sometimes you can file and offer in compromise in lieu filing an equitable relief sort of claim for innocent spouse.
The one thing that I want you to get from this video is that, actually, you use the same forms for all three types of innocent spouse. It’s a situation where you go ahead and you swing for the fences, but you’ll accept a triple or a double. In this case, you ask for the Classic Innocent Spouse Relief and if you don’t qualify, then you ask for a Separate Liability Election, and if you don’t qualify for that, then you go ahead and you apply for Equitable Relief.
There’s something important to note and that is, that you need to file for Innocent Spouse Relief within two years of the first collection activity. We really don’t have time to go into what collection activity means in this video today, but pretty much it means any sort of onerous collection activity on behalf of the government.
I’ll give you a couple examples. This is by no means an exhaustive list but the filing of Final Notice of Intent to Levy, the filing of a federal tax lien, the notification that they have kept some portion of your refund to apply it towards a back tax year; those are the types of things that we’re talking about that would constitute where you would have to go ahead and file within two years. So it’s not a situation where you only have two years from the filing of the return; it’s actually two years from the filing of any sort of collection action.
The required documents for the Innocent Spouse claim will be a 433A or 433B if you’re in business as well. You also need to file a Form 8857, three months worth of documentation proving your expenses and income, a Form 12510, and any proof of your claim to be relieved of tax debt, for example, court records, police records, et cetera.
I recently was working on a young lady’s case for her husband who was abusive and he was currently in state prison, and that’s some of the types of documentation that we were asked to provide. I believe we provided police reports and judgment records that indicated that he had been sentenced to prison for stalking in this particular case, and we were able to get Classic Innocent Spouse to go through. You don’t need super egregious circumstances like that, but in that case, it sure did not hurt us.