Innocent Spouse Protection

Most couples opt for joint filing because it reduces their tax bill, but when couples file jointly, both spouses are responsible for the taxes due. Each spouse is responsible for the entire debt because married couples have joint and several liability, which means “both spouses are each entirely responsible for the return and the tax liability and its tax obligations.”

Very often, women are often at a disadvantage in joint filing because in many marriages husbands manage the money and wives often sign what their husbands tell them to. Some divorcing men enlist their wives in filing fraudulent tax returns. In response to this, the Innocent Spouse, Section 434(c)(1) of the Internal Revenue Code, protects an “innocent spouse” from tax liability when:

  • a joint return was filed;
  • the return contained a “grossly erroneous” error, such as understated tax on the return that is due to erroneous items;
  • the innocent spouse establishes a lack of knowledge, and
  • in light of all the facts and circumstances it would be “inequitable” to impose the tax on the innocent spouse.

According to IRS Publication 971 “Innocent Spouse Relief,” an innocent spouse can be relieved of “paying tax, interest, and penalties” if the other spouse (or former spouse) improperly reported items or omitted items on their tax return. However, innocent spouse relief is not be granted if the IRS proves that the partners transferred property as part of a fraudulent scheme, such as one to defraud the IRS or a creditor, former spouse, or business partner.

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