If you're still holding the bag on an income tax debt your ex-spouse drove up, and particularly if you don’t have the wherewithal to repay it, you might be in luck. It doesn’t matter if the tax bill is a result of an understatement of earnings tax on the return, or if it’s just an underpayment of the tax due at the time--you may have a chance of absolving yourself of the obligation for payment. But you’ll have to fight for it.
The IRS doesn’t care if you've got a valid divorce decree and a marital separation arrangement that declares your ex partner is responsible for all previous taxation liabilities—it simply wants to get paid. The IRS’ attitude is: fight it out with your ex, but we’re coming after you.
Filing an Innocent Spouse Claim is difficult and time consuming, particularly in a community residential property state. Here are the criteria to figure out if you will qualify:
- The taxes owed belong to your ex-spouse (maybe from self-employment tasks and you were perhaps not working at the time or from assets held in that spouse’s name)
- You are no longer hitched to that spouse
- You thought that partner would pay the taxes due at the time
- If there was an audit of the income tax return, you did not know about the items changed in the audit that resulted in the understatement of the taxation liability
- You'd experience a financial hardship if you were needed to spend the tax. You would never be able to pay for fundamental living expenses like food, shelter, and clothing
- You did perhaps not considerably benefit (above normal help) from the unpaid taxes
- You suffered punishment during your marriage
- If any of the above is the case, then register Form 8857 to request innocent spouse relief.
Brand new proposed regulations just came down regarding issue No.7 primarily. The IRS feels that the spouse who is asking for innocent spouse relief based on abuse has good cause. This proposed revenue procedure expands exactly how the IRS will take into account abuse and monetary control by the non-requesting partner in determining whether equitable relief is warranted.
Evaluation of the innocent spouse system demonstrated that when punishment is involved, the innocent spouse may not have been able to challenge the therapy of any things on the joint return, concern the payment of the taxes reported as due on the joint return, or challenge the non-requesting spouse’s assurance regarding the payment of the taxes. Review of the system also highlighted that lack of monetary control may have a similar impact on the innocent spouse’s ability to satisfy joint taxation liabilities.
As a result, this proposed revenue procedure provides that abuse or absence of monetary control may mitigate other factors that might otherwise consider against granting equitable relief under area 6015(f).
In accordance to IRS Publication 971, an innocent partner features two years from discovering the tax obligation in concern to register for relief. The two-year restriction has been extended, therefore don’t let the moving of time stop you from filing a claim.
Because it's a difficult task, we recommend that you have a tax professional assist you using the procedure.