When you sign a joint tax return with your spouse you are jointly and severally liable for the tax, penalty and interest shown due on the return and for any assessments arising from a later audit of that return.

In certain clearly defined cases, a spouse can get relief from this joint and several liability.

There are two types of relief available to so called “innocent” spouses:

   1.  Innocent Spouse Relief; and

   2.  Equitable Relief

Warning: There are time limits within which a request for relief must be filed, therefore, it is critical that you seek the advice of competent tax counsel immediately upon your first receipt of an IRS notice or letter.

The remainder of this tutorial discusses the requirements of each type of relief and tells you how to file for that relief. 

Innocent Spouse Relief

If the joint liability is attributable to an incorrect tax return item (a wrongful deduction or unreported income) of one spouse, the other spouse might qualify for innocent spouse relief.

There are two basic requirements of Innocent Spouse Relief:

1. The underpayment is attributable to an erroneous item of your spouse; and
2. You did not know or should not have been held to reasonably know that there was an underpayment.

If there was a tax liability shown due on the return when you signed it, you do not qualify for Innocent Spouse Relief because that means you knew or should have known about the underpayment.

Also, in cases where your spouse failed to report all of his income, you will be charged with having known about the under-reporting if your standard of living greatly exceeded the amount of income actually reported on the return.

In other words, if your spouse is saying he only made $50,000 and he bought you a 5 karat, flawless diamond brooch and a Porsche, you aren’t going to qualify for this form of relief.

Equitable Relief

If you don’t qualify for Innocent Spouse Relief, you may be eligible for Equitable Relief.

Equitable relief will be granted when “taking into account all the facts and circumstances, it is inequitable to hold [the taxpayer] liable for the deficiency in tax.”

IRS Rev. Proc. 2000-15, Section 4.02, states that Equitable Relief will be granted when the following facts exist:

             1.  At the time relief is requested, the requesting spouse is no longer married to, or is legally separated from, the non-requesting spouse, or has not been a member of the same household as the non-requesting spouse at any time during the 12 month period ending on the date relief was requested;

             2.  At the time the return was signed, the requesting spouse had no knowledge or reason to know that the tax would not be paid. The requesting spouse must establish that it was reasonable for the requesting spouse to believe that the non-requesting spouse would pay the reported liability; and

             3. The requesting spouse will suffer economic hardship if relief is not granted.

Applying for Innocent Spouse Relief or Equitable Relief

To obtain Innocent Spouse Relief or Equitable Relief you must affirmatively apply for it.

You do so by filing Form 8857, Request for Innocent Spouse Relief, with the appropriate IRS office. 

Supporting documentation and an analysis of case law should always be included with the Form 8857.