Generally, when you and your spouse file joint income tax returns, the law makes both you and your spouse responsible for the entire tax liability. This is called joint and several liability. Both spouses remain 100 percent responsible for all liabilities shown on the return and any additional amount the IRS may determine owed on the return until the IRS collects the amounts due from either spouse.
However, a spouse may qualify for relief from joint and several liability on one of the following three bases: innocent spouse relief, separation of liability relief and equitable relief.
Qualifications for Relief
Each bases for relief has its own qualifications. For instance, to qualify for innocent spouse relief, a requesting spouse must meet four conditions. First, the requesting spouse must have filed a joint income tax return with his/her spouse. Second, the IRS must have found certain errors in the return attributable to the non-requesting spouse resulting in additional taxes being owed than what is shown on the original return. Third, the requesting spouse must show that when he/she signed the returns he/she did not know nor had reason to know of the errors. And, fourth, taking into consideration all of the facts and circumstances, it would be “unfair” not to grant relief. The IRS has developed factors in determining what “unfair” means. Some examples of these factors are whether the requesting spouse received additional benefit from the other spouse beyond the normal support, whether the requesting spouse has been abandoned, whether the spouses are divorced or separated or whether the requesting spouse received a benefit on the return from the additional liabilities owed.
To qualify for separation of liability relief, the requesting spouse must be divorced or legally separated from the other spouse, or must not have lived in the same household with the other spouse for at least 12 months prior to filing Form 8857 (this form is discussed below).
If a requesting spouse does not qualify for innocent spouse relief or separation of liability relief, then equitable relief may still be available. This type of relief is only available if there is “unpaid tax,” i.e., taxes that are properly shown on the joint income tax return which have not been paid.
In addition, even if a joint return is not filed, a resident in a community property state may request relief from liability attributed to the requesting spouse due to community property laws. Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
Regardless of which type of relief is requested, Form 8857 must be filed with the IRS.
The form should be filed as soon as the requesting spouse believes he/she may qualify for any one of the above described bases for relief. But, generally, the form should be filed no later than two years after the date when the IRS first tried to collect taxes from either spouse. After F. 8857 is filed with the IRS, the IRS will review it and contact the non-requesting spouse to ask if he/she would like to participate in the process. Then, the IRS will issue a preliminary determination letter to both the requesting and non-requesting spouse. If neither appeals, then a final determination letter will be issued. If either spouse appeals, the IRS Office of Appeals will issue a determination letter to both spouses to determine the appeal.
Quick Look Process
Since innocent spouse cases are considered on a first-come, first-serve basis, depending on the number of cases filed, it may take a while before the case is considered. However, on June 1, 2015, the IRS Appeals Office published a memorandum (AP-25-0615-0005) which provides guidance on innocent spouse cases quick look process. The memorandum is effective as of June 29, 2015. Pursuant to this guidance, if the IRS Appeals Office determines that a case meets the quick look qualifications, then the IRS will expedite the innocent spouse case process. The case should be screened within five business days to determine whether it qualifies for the quick look process. If it does, the IRS will make direct phone contact with the requesting spouse or representative within 30 to 45 days of receipt.
Some of the examples of quick look factors are:
- The requesting spouse would be granted full relief, if the non-requesting spouse is appealing a single year, with no new substantive information.
- The requesting spouse is appealing a single year, the deficiency or underpayment is solely attributable to the requesting spouse, and the requesting spouse is denied relief in full because no exceptions were satisfied.
- The requesting spouse would be granted relief under IRC 6015(c) (i.e., the couple is either legally separated or not living in the same household), but the refund was barred, and the requesting spouse is appealing for the refund.
- It was a combination of collection due process, equivalent hearing and innocent spouse case, the Cincinnati Centralized Innocent Spouse Office granted full or partial relief to the requesting spouse, and the non-requesting spouse did not appeal.
The memorandum also provided the following factors which would be weighed against the quick look process:
- multiple years are involved;
- complicated community property issues;
- conflicting facts requiring evaluation of facts and litigation hazards;
- a combination of deficiency and underpayments;
- requiring substantial research;
- involving abuse;
- involving returns filed fraudulently; and
- requiring substantial review of requesting spouse information due to non-requesting spouse’s information.
If joint income tax returns are filed with a current or former spouse, and you believe that only your spouse or former spouse should be responsible for all or part of the taxes, a request for relief from the tax liabilities should be filed with IRS.