Innocent Spouse Relief

Innocent Spouse Relief can only occur if you meet the following conditions. One, you filed jointly with your spouse. Two, there is an understated tax on the return that is due to erroneous items of your spouse or former spouse. Three, you can show that when you signed the joint return that you did not know, and had no reason to know, that the understated tax existed. Four, taking into account all the facts and circumstances, it would be unfair to hold you liable for the understated tax.

What is understated tax?

Understated tax is if the IRS determines that your total tax should be more than the amount that was actually shown on your return. An example of an understated tax is if your spouse had earned $120,000 for his income, but for his tax records, your spouse puts down $100,000 on his tax return. The IRS would deem that you and your spouse would have an understated tax of $20,000 for not filing in properly. 

 

Erroneous items fall under one of the following. One, unreported income is any gross income item received by your spouse or former spouse that is not reported. Two, incorrect deduction, credit, or basis is where there has been any improper deduction, credit or property basis claimed by your spouse or former spouse. If you have any knowledge of the erroneous items, you and your spouse will be jointly liable for the understated tax. 

 

There is a partial relief when a portion of the erroneous item is unknown. For example, you knew that your spouse had $5,000 in gamblings winnings, but he actually had $25, 000 in gambling winnings. You can apply for a relief of the $20,000 that you did not know about. Another way of not receiving relief is if you receive a significant benefit from your spouse. A significant benefit is any benefit in excess of normal support. Evidence of a direct or indirect benefit may consist of transfers of property or rights to property, including transfers that may be received several years after the year of the understated tax.