You can use any of the three types of innocent spouse relief for taxes that were underreported on your return. Underreported taxes can be the result of any of the following incorrect items:
- Income was underreported on your return.
- Deductions or credits were claimed improperly.
- Basis in property was overstated.
Underreported vs. Unpaid Taxes
If you claim traditional innocent spouse relief or separation of liability relief, you can only get relief from underreported taxes. If your taxes were reported correctly, but you just couldn’t afford to pay on time, equitable relief is the only innocent spouse relief option you can use.
Understatements of tax usually occur when your spouse was trying to hide some of their income from the IRS, claim extra deductions (such as the home office deduction) that they weren’t entitled to claim, or just made an error on their tax return. You generally cannot have had actual knowledge that your spouse was understating tax on your return in order to qualify for innocent spouse relief.
Fortunately, many other tax resolution strategies can be used for unpaid taxes. For example, you could get innocent spouse relief for the underreported portion of your back taxes, and then request an installment agreement for the remaining portion of unpaid taxes.
Statute of Limitations
You must claim traditional innocent spouse relief or separation of liability relief within two years from the date the IRS first attempted to collect the tax debt from you. If you receive certain IRS notices or the IRS files a tax lien or initiates a levy, these actions could also begin the two-year period.
You have more time to claim equitable relief, depending on whether you’re seeking a refund or relief from back taxes.
Effect of Innocent Spouse Relief
Innocent spouse relief—if it is granted—will only relieve you from liability for the tax attributable to the improper items on your joint return. If you use separation of liability relief, you will be allocated the tax attributable to your items on the joint return, using your income, deductions, and other tax items.
If you have other unpaid taxes that aren’t related to an understatement on your return, you’ll need to consider only tax relief options. Innocent spouse relief sometimes needs to be combined with other tax resolution methods to get a comprehensive solution to your tax problems.
The Gartzman Law Firm offers tax settlement help for both federal and state tax debt, including innocent spouse relief requests. Use our contact form to request a consultation with an Atlanta tax resolution attorney.