Tax rules can get pretty tricky, especially when you end up with a surprise tax bill because of something your spouse or ex-spouse did. It all comes down to what's called "joint and several" liability. When you file a
, both of you are on the hook for the entire tax bill, not just the part that belongs to each person. So, the IRS can go after either one of you for the whole amount, even if the mistake wasn't yours. This includes any extra taxes, penalties, or interest they find later during an audit.
In some cases, spouses are eligible for “innocent spouse relief.” Innocent Spouse Relief is a provision under U.S. tax law that allows a spouse to be relieved of responsibility for paying taxes, interest, and penalties that result from errors or omissions on a joint tax return, which were made by the other spouse. This relief can be requested when one spouse believes they should not be held liable for the underpayment of taxes due to circumstances such as:
Misreported income: If one spouse failed to report income, misreported it, or improperly claimed deductions or credits without the other spouse's knowledge.
Unfairness: It would be unfair to hold the requesting spouse responsible for the underpayment or understatement of taxes.
There are three types of Innocent Spouse Relief:
Innocent Spouse Relief (Standard): This applies when there is an understatement of tax on a joint return that’s solely attributable to the other spouse.
Relief by Separation of Liability: For couples who are divorced, legally separated, or no longer living together, this relief allocates the liability for underreported taxes between the spouses.
Equitable Relief: When the other two forms don’t apply, this relief might be available if holding the spouse liable would be unfair given the circumstances.
To apply, a spouse must file Form 8857, and it has to be done within a specific time frame (usually two years from when the IRS first attempted to collect the tax). Each case is reviewed based on its unique facts.
The issue of innocent spouse relief often ends up in court. Not every case is winnable, so let’s look at 2 court cases from this past year and their outcomes.
Understated Amount Owed on Couple’s Joint Tax Returns
Both the IRS and the wife agreed that she didn’t know, nor had any reason to know, that taxes were underpaid. She had no involvement in her ex-husband’s business or employment, as he kept his finances hidden and maintained separate bank accounts. After considering all factors, the U.S. Tax Court determined it would be unfair to hold her responsible for the tax deficiency, and her request for innocent spouse relief was granted (TC Memo 2024-26).
Payment of Late Spouse’s Taxes
A widow claimed that paying her late husband’s taxes would cause her economic hardship, noting her income was below the poverty line and her assets were insufficient to cover the taxes. However, she failed to provide proof of her income or the value of her two homes. Meanwhile, records showed she had enjoyed several expensive vacations and bought a luxury car while her taxes went unpaid. The U.S. Tax Court denied her request for relief (162 TC No. 2).
As you can see, whether or not you qualify for innocent spouse relief depends entirely on the specifics of your case. If you're considering seeking relief, there are forms to fill out and deadlines to meet. We're here to help you navigate that process.
Also, it’s important to keep "joint and several liability" in mind when filing future tax returns. While filing jointly may lower your tax bill, choosing to file separately could ensure that you're only responsible for your own taxes. Feel free to reach out to one of our Tax Professionals with any questions or concerns!