Legal Questions about Innocent Spouse Relief

Innocent spouse relief is a form of tax relief that can relieve you of your tax liabilities, interest and penalties as a result of filing joint tax returns with your current or ex-spouse. Innocent spouse relief can be a godsend for many that have no idea that there were inconsistencies or discrepancies on a joint tax return. Below are the most commonly asked questions about innocent spouse relief.

If a spouse receives a cash gift but didn’t know that it wasn’t claimed on taxes can they file for innocent spouse relief?

Gifts are usually not considered taxable income, so there may be no tax issue.

If someone is filing innocent spouse relief from a previous marriage, and then filing joint tax return with their new marriage could the new spouse be held accountable for the taxes from the previous marriage?

When a spouse divorces after filing a joint tax return, only the two parties on the joint tax return are usually held liable for previous taxes. Even in the event of a subsequent marriage, the current spouse would not be held responsible for the previous taxes.

In California, if you are going through a divorce, can you sue your spouse for improper management of business resulting in tax fraud?

If a spouse causes you economic losses, and you can establish that you had no idea about the actions of your spouse, then you may have the right to sue. However, if you are still married, then tax fraud can be considered as a joint responsibility, unless you can prove innocence in the tax fraud and are able to file for innocent spouse relief. Innocent spouse relief claims are generally easy to file, but at times can be hard to prove. Getting expert opinion on your case and/or retaining legal counsel may be advisable.

Is someone responsible for their spouse’s past tax debt?

If the debt happened before the marriage then they are usually not liable for the past tax debt. Only the person with the tax debt is usually held responsible for it.

Who can qualify for innocent spouse tax relief?

You must meet all of the following conditions to qualify for innocent spouse relief.
1. You filed a joint return which has an understatement of tax due to erroneous items of your spouse (or former spouse);
2. You establish that at the time you signed the joint return you did not know, and had no reason to know, that there was an understatement of tax;
3. Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax;
4. A request for innocent spouse relief will not be granted if the IRS proves that you and your spouse (or former spouse) transferred property to one another as part of a fraudulent scheme. A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, ex-spouse, or business partner.
Filing your taxes jointly can provide many benefits - and sometimes it can create problems. When you are married and file a joint return together it means that both individuals are jointly and individually responsible for the taxes that are owed, even if one spouse made the majority or the entire amount of taxable income. If the IRS determines several years after the joint return was filed that there was a deficiency in tax, the IRS is authorized to make each spouse individually accountable and liable for the discrepancy. As a result, filing taxes jointly can sometimes put a financial strain as well as raise questions regarding innocent spouse relief.