Marriage carry heavy tax consequences that could be alleviated through careful tax planning strategies. Marriage planning should include a discussion about tax liability. The subject of tax is even more important if you plan to execute a prenuptial or premarital agreement.

Married taxpayers are jointly and severally liable- meaning that each taxpayer is legally responsible for the entire liability- for the tax and any additions to tax, interest, or penalties that arise because of a joint return, even if they later divorce. One spouse could be legally held liable for all the tax due, even if the other spouse earned all the income or claimed improper deductions or credits.

It should be noted that it is not true that you cannot separately file your tax returns when you are married, as some taxpayers have been misled to believe. You could legally file using the status married filing separately. Taxpayers lose some credits when they file married filing separately. However, it provides some advantages for some couples because each taxpayer’s financial circumstances could be very different.

Could an innocent spouse be relieved from tax liability on a joint tax return?

There are three types of relief from joint and several liability that are available to married taxpayers who filed joint returns: 1) Innocent spouse relief (not the same as injured spouse relief), 2) Separation of liability relief, and 3) Equitable relief.

Are you an innocent spouse?

1. Innocent Spouse relief. Under innocent spouse relief, a taxpayer will use Form 8857 to request the relief, if all the conditions below are met:

1.1.  The spouse must have filed a joint return with an understatement of tax directly related to the spouse’s erroneous items.

1.2.  The taxpayer seeking relief can establish that at the time he or she signed the joint return, he or she did not know and had no reason to know, that there was an understatement of tax.

1.3. The taxpayer and the spouse or former spouse have not transferred property to one another as part of a fraudulent scheme.

1.4.  Considering all the facts and circumstances, it would be unfair to hold the taxpayer liable for the understatement of tax.

2. Separation of liability relief could be claimed by taxpayers who are no longer married, widowed, or legally separated and have not been members of the same household for a 12-month period. The tax, plus interest and penalties, that is understated on the joint return is allocated between spouses or former spouse. Generally, the tax allocated is the amount the taxpayer is responsible for paying. This relief is available only for unpaid liabilities resulting from the understated tax. Refund is not allowed.

3. Equitable relief is for a properly stated but underpaid tax. When a taxpayer is not qualified for other forms of relief, he or she may still be relieved of responsibility for tax, interest, and penalties.

When do you file Form 8857?

Form 8857 is generally filed no later than 2 years after the date on which the IRS first attempted to collect the tax from you. However, there are some exceptions to the filing deadlines. Taxpayers are advised to consult with qualified tax professionals.

Further reading:

IRS Publication 971 (December 2021)

IRC section 6015.

 Hiring a tax resolution expert is the best action a taxpayer could take during an audit by the IRS or a state Department of Revenue. 

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