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Pros and Cons of Each Type of Innocent Spouse Relief

Innocent spouse relief can be an effective way to escape from liability for your spouse or former spouse’s tax debt. There are three types of innocent spouse relief, and each has its own costs and benefits.

Traditional Innocent Spouse Relief

Traditional relief can be used for understated tax on a joint return. Your spouse must be responsible for the erroneous item on your return, and you must show that you didn’t know or have reason to know about the erroneous item.

Whether you had a reason to know about the item is determined based on many factors. Your education level, financial situation, and the nature of the erroneous item will all be examined by the IRS when making this decision.

There must also be indications of unfairness present in your case, such as desertion by your spouse. If you received a significant benefit from the understated tax, this will way against granting relief.

Traditional relief can be used in many situations where one spouse had primary control over the couple’s finances. However, it must be requested within two years from you become aware of the tax liability, and you can’t use it to request relief from unpaid—rather than understated—tax.

Separation of Liability Relief

Separation of liability relief is used to split the items on the return between the spouses. You will only be responsible for the tax liability attributable to your items.

To request separation of liability relief, you must be divorced, separated, widowed, or have lived in a separate household from your spouse for 12 months. You not required to show indication of unfairness or that you had no reason to know of the erroneous items, but actual knowledge of the erroneous items is generally disqualifying.

However, you may still obtain this relief when actual knowledge existed if you were a victim of domestic violence. In these cases, you may still receive relief if you signed the return under duress.

Separation of liability relief is ideal for couples that are no longer married. You must request this relief within two years of the date you became aware of the tax liability.

Equitable Relief

Equitable relief is a catch-all provision. You must not be eligible for either of the other types of innocent spouse relief to qualify for equitable relief.

Equitable relief offers several benefits:

  • You may request equitable relief as long as the IRS still has a right to collect the tax debt. This is a much longer relief period than other types of innocent spouse relief.
  • You can use equitable relief for unpaid tax that was correctly reported on your tax return.
  • You can use equitable relief to request a credit or refund.

However, you can’t use equitable relief if you qualify for the other types of innocent spouse relief. Talk to a tax attorney to figure out which type of innocent spouse relief fits your situation.

The Gartzman Law Firm handles tax debt settlement, innocent spouse relief, and other tax resolution cases. Use our contact form to request a consultation with an Atlanta tax resolution attorney.