The good news? Tax debt relief is possible. The not-so-good news? Not everyone qualifies for a settlement, but there are several options to explore and consider. The IRS offers a variety of tax debt relief programs and a lot of online tools and forms to make it easier to apply for them. If you are overwhelmed by the complexity of your situation, consult a professional. Start resolving your tax issues today.
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Call today. For these purposes, an economic hardship exists if satisfaction of the tax debt in whole or in part would cause the requesting spouse to be unable to pay reasonable basic living expenses. If denying relief from joint and several liability will cause the requesting spouse to suffer economic hardship, this factor weighs in favor of relief. Conversely, if denying relief from joint and several liability will not cause the requesting spouse to suffer economic hardship, this factor will be neutral.
For understatement cases, whether the requesting spouse knew or had reason to know of the item giving rise to the understatement or deficiency as of the date the joint return was filed. If the requesting spouse did not know and had no reason to know of the item giving rise to the understatement, this factor weighs in favor of relief.
On the other hand, if the requesting spouse knew or had reason to know of the item giving rise to the understatement, this factor weighs against relief.
For underpayment cases, whether the requesting spouse knew or had reason to know that the nonrequesting spouse would not or could not pay the tax debt at the time the return was filed or within a reasonable period of time after the return has been filed. This factor weighs in favor of relief if the requesting spouse reasonably expected the nonrequesting spouse to pay the tax debt reported on return. Whether the requesting spouse or nonrequesting spouse has a legal obligation to pay the outstanding federal tax debts, g.
This factor weighs in favor of relief if the nonrequesting spouse has the sole legal obligation to pay the outstanding income tax debts pursuant to the agreement. If the requesting spouse has the sole obligation to pay, this factor weighs against relief. Whether the requesting spouse significantly benefitted from the unpaid tax debts or understatement. For these purposes, a significant benefit is any benefit in excess of normal support.
Thus, if the requesting spouse enjoyed the benefits of a lavish lifestyle, such as owning luxury assets and taking expensive vacations, this factor would weigh against relief. But if the nonrequesting spouse controlled the household and business finances or there was abuse, then this may mitigate any expensive lifestyle decisions rendering it as a neutral factor.
Whether the requesting spouse has made a good faith effort to comply with the income tax laws in the tax years following the tax year or years to which the request for relief relates. Whether the requesting spouse was in poor physical or mental health. This factor weighs in favor of relief if the requesting spouse was in poor mental or physical health at the time the return or returns were filed or at the time the requesting spouse requested relief.
How to Request Innocent Spouse Relief. Freeman Law Firm Services If you need assistance in managing the legal process , Freeman Law is where clients turn when the stakes are high and the issues are complex. Practice Areas. Our Team. Jason B. TL Fahring. Greg Mitchell. Jack Ormond. Zachary Montgomery.
Fernando Juarez. Larissa Mussi. Kathy Donalds. What Sets Us Apart. Bankruptcy Attorney. Blockchain and Crypto Attorney. Business Litigation. Computer Intrusion and Cyber Litigation Attorney. Forensic Accounting and Investigations Attorneys. The IRS will figure the tax you are responsible for after you file Form You are not required to figure this amount. But if you wish, you can figure it yourself. If you actually knew about an erroneous item that belongs to your spouse or former spouse , the relief discussed here does not apply to any part of the understatement of tax due to that item.
You and your spouse or former spouse remain jointly liable for that part of the understatement. For information about the criteria for determining whether you actually knew about an erroneous item, refer to Relief from Separation of Liability for more information about Actual Knowledge.
If you had reason to know about an erroneous item that belongs to your spouse or former spouse , the relief discussed here does not apply to any part of the understatement of tax due to that item. The IRS will consider all facts and circumstances in determining whether you had reason to know of an understatement of tax due to an erroneous item. The facts and circumstances include:. You may qualify for partial relief if, at the time you filed your return, you had no knowledge or reason to know of only a portion of an erroneous item.
You will be relieved of the understatement due to that portion of the item if all other requirements are met for that portion. The IRS will consider all of the facts and circumstances of the case in order to determine whether it is unfair to hold you responsible for the understatement.
A significant benefit is any benefit in excess of normal support. Normal support depends on your particular circumstances. 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 understatement. You receive money from your spouse that is beyond normal support. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
On joint tax returns, both filers are generally responsible for the tax bill. But innocent spouse relief is a way to avoid paying additional tax you might owe the IRS if your spouse or ex-spouse made significant errors on your joint tax return. Innocent spouse relief is not the same as injured spouse relief. The IRS can deny your request, and the process can take as long as six months. IRS Publication has all the details, but here are five important rules to remember about qualifying for innocent spouse relief.
The error has to be attributable to the other person. The circumstances must be compelling. Generally, you have to request innocent spouse relief no later than two years after the IRS started trying to collect the tax from you.
There are some exceptions. Innocent spouse relief is for people who filed a joint tax return the married filing jointly tax status. If income is missing from your tax return, it should be income your spouse received, not you. The IRS looks at everything from the nature of the error to your financial situation, your educational background, how much you participated in the activity that created the problem, whether the issue is part of a pattern and other factors. The IRS also considers fairness when determining whether to grant innocent spouse relief.
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