So you have passed the brink of no return in your relationship and decided to file for divorce. Before you do, it’s wise to make some financial preparations ahead of your court date. Getting pictures of assets, copies of bank statements and any retirement accounts is a good start.
Because of certain benefits that filing jointly allows, many married taxpayers elect to file joint returns. However, filing a joint return carries the added burden of both parties being liable for the tax due. In addition, under the IRS code, married taxpayers who file jointly are each liable for any additions to the tax, penalties, or interest associated with the account.[1]
Innocent Spouse relief. Innocent spouse relief is a fairly hot topic of conversation particularly among family lawyers and those individuals who are going through separations because oftentimes these people feel that they wrongly injured by their spouse or significant other’s tax liability. Innocent spouse requires several things and I want to be clear about those from the onset. First of all, you must have some sort of understated tax in the return that you had no knowledge to. If your spouse runs a business and they understated their tax liability and you had no knowledge of it, then you could potentially be a candidate for a innocent spouse. You also have to show that when you sign the return you have no knowledge of the liability and do not benefit from it. That is a particularly tricky proposition because oftentimes if one spouse is cheating on their return or understating liability then the other spouse is receiving some indirect benefit of that whether it’s increased cash or to the household or some other financial gain. The IRS will not grant innocent spouse relief in those cases.
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When you sign a joint tax return with your spouse, you are signing a legal document that holds both signatories in “joint and several liability” for the information on the return. In other words, each of you can be held liable for the entire tax amount, including penalties and interest if you underpay or do not pay at all.
But what if your spouse underpaid your joint taxes without your knowledge? What if, when your spouse prepared the tax return, he or she did not report one or more items, used the wrong tax basis, or did something else that caused your joint taxes to be underpaid?
This article discusses the IRS innocent spouse relief rules. When couples file jointly, the law makes both parties responsible for the entire tax liability. Under tax law, this is called joint and several liability,[1] which is defined as two or more persons who share responsibility with respect to the same liability (i.e., event or act).
You and your spouse are jointly responsible for paying federal tax due, interest accrued, and any applicable penalties under the IRS innocent spouse relief requirements. This is especially true if you and your spouse filed a joint return. However, if you believe that your current or former spouse should be solely responsible for a particular item or the underpayment of tax on the joint tax return, then you may be eligible for Innocent Spouse Relief.