Innocent Spouse Relief and Taxes

During a marriage, it is very common for one spouse to be primarily responsible for the financial aspects, such as paying bills, making investments, and making sure the parties’ taxes are paid.  When the parties are later divorce, one or both spouses may discover that there are aspects of the couple’s finances of which they were each previously ignorant.  Taxes and what went into filing tax returns is a common area where the responsible party will “fudge” the numbers or keep the other spouse ignorant of the contents.

In cases where one party believes that the party who has traditionally been responsible for assembling documents and filing taxes has not been completely adhering to the tax code, the innocent spouse may want to include certain language in the divorce decree.  This language will usually state something along the lines of the other spouse will hold him or her harmless in the event the IRS comes seeking back taxes or penalties.  However, this language will not stop the IRS from pursuing both spouses in the event that the parties have not properly paid their taxes in years past.

If one spouse is not paying according to the law, it is possible the other spouse may seek Innocent Spouse Relief.  If, for example, the husband has always been responsible for paying taxes and the parties have always filed jointly during their marriage, there are certain situations during which the wife may seek innocent spouse relief if the IRS seeks back taxes, penalties and interest against the parties.  Internal Revenue Code 6015 provides the conditions under which one spouse may seek innocent spouse relief from these penalties.  If you are the innocent spouse, you can be relieved of responsibility for interest and penalties if your spouse or former spouse improperly reported or omitted items on the tax return.  For this to apply, the innocent spouse must demonstrate all of the following:

  1. The joint return must have an understatement of tax owed;
  2. The understatement must be a result of your spouse’s erroneous items, such as income received by that spouse, or his or her improper reductions;
  3. When the innocent spouse signed the return, you did not know or have reason to know of the understatement;
  4. It would be unfair to hold the innocent spouse accountable, taking all the relevant situations into account;
  5. The innocent spouse must file for relief within two years of the time the IRS started collection actions.

We have extensive experience helping our clients understand their obligations under tax and divorce law.  Call us today at 651-413-9568 and schedule a consultation to talk about your rights and responsibilities.