When it comes to tax liability for the married filing jointly status both spouses are responsible for the information filed on the tax return. But, what happens if one spouse finds later that income was under-reported and the IRS has assessed penalties and interest in addition to an additional tax liability.
Let’s take the scenario one step forward and assumed that the spouse did not know if the under-reported income and wants to claim innocent spouse.
The IRS offers an innocent relief spouse program for spouses who were unaware of what their spouse was reporting on the tax return. To participate in the innocent spouse relief program and get approval from the IRS and the tax courts to participate are several conditions that have to be met.
1. You have to have filed a married filing joint report with your spouse for the tax year the IRS is assessing for additional taxes, interest, and penalties for the under-reporting of income and tax liability.
2. The spouse requesting innocent spouse relief must have been under duress when they signed the return.
3. The spouse requesting innocent spouse relief must complete Form 8857 statement that outlines the steps and requirements for relief.
4. Spouse must establish at the time that the return was signed, they did not know of the under-reported income or tax liability.
5. Prove using facts that it would be unfair to hold the spouse responsible for the understated tax liability.
6. Spouse requesting innocent spouse relief must elect the relief within two years after the collection activity begins to collected the understated tax.
7. The spouse must prove that they did not participate in the understatement of income and taxes.
The courts and the IRS may grant partial relief depending on the facts.
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