If the taxpayer is married, it is likely that she filed a joint tax return with her spouse to minimize her tax liability.
While this is beneficial, it could also be a disadvantage as the taxpayer and her spouse agreed to be held jointly liable for any taxes, penalties, and interest due on their joint return. This still stands even if a divorce decree states that her former spouse will be responsible for all taxes. It also stands if there is some other agreement between the taxpayer and her spouse.
The taxpayer should be aware of her options, as there are ways that can protect both the taxpayer and the spouse from the mistakes of either the other. If the taxpayer realizes that the IRS is trying to collect on any taxes that were actually incurred as a joint partnership, she may qualify for one of the following tax relief strategies:
Innocent Spouse Relief - This kind of relief is available to the taxpayer if she finds there is an understatement of tax or maybe a deficiency on the tax return due to the erroneous items of her former or current spouse. A deficiency would then result when the IRS sees an additional liability on the taxpayer's unreported income or disallowed deductions. The taxpayer must show that when the original tax return was filed and signed, she had no prior knowledge that the understatement of tax actually existed. The IRS will look at the taxpayer's circumstances and the facts surrounding her case to see if it was an unfair ruling against her.
Separation of Liability - This is also available to the taxpayer if an understatement of tax or a deficiency on a tax return has occurred. The taxpayer may be allowed relief from the liability of the understatement of tax if it is separated. For the taxpayer to qualify for this relief, she has to be divorced from her spouse, legally separated or living apart from her spouse or former spouse for 12 months prior to the filing of the relief request.
Equitable Relief - The taxpayer may not actually qualify for the Separation of Liability Relief or the Innocent Spouse Relief. If this is the case, she can request Equitable Relief. In this case the IRS can determine that the taxpayer cannot be held accountable for the understatement or underpayment of the tax. To do this the IRS will assess the taxpayer's facts and all of her circumstances. This is usually granted to the taxpayer when she believed that her former spouse would actually pay off the tax on the joint tax return but did not do so.
As part of their ongoing investigations, the IRS has to contact the taxpayers spouse or former spouse. This is to allow the spouse of the taxpayer to give any information required to assist in their enquiries. However, the taxpayer's privacy will never be infringed. If the taxpayer is a victim of domestic abuse and she is afraid that the filing of a request for relief will result in abuse from her spouse or former spouse, the IRS has to act in the most sensitive of manners. The taxpayer's unfortunate circumstances will never result in special treatment, but it can help her gain relief as the IRS takes everything into consideration.
If the taxpayer needs more information on any Innocent Spouse provisions, we can assist her with a free and confidential consultation to help her. We can negotiate relief and help with any former or current spouse's tax deficits. Our expert and highly qualified team of tax lawyers, enrolled agents and CPA's will help the taxpayer in any way we can.