No matter how careful you are on your taxes, mistakes are bound to happen sometimes. For those with a spouse or ex-spouse, there’s an even higher potential for reporting errors, which often bear serious financial consequences. Innocent spouse relief is a way of relieving federal tax responsibilities, including interest and penalties, in the event that your spouse or ex-spouse reported items improperly or omitted them entirely on your tax return.
Proving an innocent mistake to the IRS
The first step in this area of the federal tax law process is to file Form 8857. From there, the IRS will determine how much of the tax is your responsibility to pay. While it’s not required to calculate the amount of taxes you owe yourself, some still choose to do so.
It’s wise to verify that your particular tax, penalty, and interest situation qualified for innocent spouse relief before you begin the process. The conditions you must meet in order to qualify for innocent spouse relief are:
- Taxes were understated on a joint return because of erroneous items of your spouse or former spouse.
- It is established that you were unaware of the tax understatement at the time of signing the joint return.
- Holding you responsible for the tax understatement is unfair when all facts and circumstances are considered.
- There was not a transfer of property between you and your spouse or ex-spouse intended as a fraudulent scheme.
Erroneous items often come in the form of unreported income. When there are multiple sources of income that both spouses are receiving, it’s easy to forget about one and leave it out in your reporting. Erroneous items also commonly occur with deductions, credits, or property bases that were calculated incorrectly.
In cases where it’s proven that you only knew about a portion of the erroneous item, you may qualify for partial relief under federal tax law. This means that only the understatement caused by that unknown portion of the erroneous item is relieved.
Being told by the IRS that you’ve understated your taxes is usually a frightening and high-pressure situation. If your tax misunderstanding was due to your current or former spouse who improperly reported items or completely left them out, it may be possible to relieve tax responsibilities like penalties and interest.