Innocent Spouse Tax Relief
Episode 14: In this episode, Timalyn explains how a spouse may do something, or neglect to do something which results in significant tax issues. But what happens if you didn’t know what your spouse was doing? Today, Timalyn will discuss Innocent Spouse Tax Relief. It’s definitely worth the next few minutes to listen and learn.
Note: Tax Relief with Timalyn Bowens is now available on Apple Podcasts!
Timalyn begins with the example of a widow with limited income, working in a fast food restaurant. Her deceased husband ran a business and the IRS determined he had filed years of fraudulent returns. She had to serve prison time and repay the taxes for this fraud, even though she didn’t work in his business. They filed joint returns, which made her liable for his fraud.
The Innocent Spouse Tax Relief Option
Back taxes shouldn’t ruin your life, but they can. Innocent spouse tax relief enables a spouse to avoid full responsibility for the actions of the other spouse (or former spouse). It includes the additional tax, penalties, and interest assessed due to fraud and/or negligence.
This is different from the Injured Spouse Relief involving the seizure of a tax refund to pay federal debts, back taxes, etc.
Requirements for Innocent Spouse Tax Relief
There are several specific requirements that must be met in order to qualify:
- Married Filing Jointly tax returns were filed for the year(s) in question.
- The return shows understated tax due to erroneous items of your spouse/former spouse.
- You must prove you were not involved in the fraud and/or negligence, nor would you have reasonably known about it when you signed the return(s).
Common Types of Tax Fraud
- Understating or overstating your personal income or the income of a business.
- Using “creative” deductions.
- Claiming a child who is not yours on your returns.
If you realize one or more of the above has happened, after filing, you can file for Innocent Spouse Tax Relief. You’ll need to use IRS Form 8857.
Can the IRS Deny My Claim?
Yes. You will be denied if the IRS determines you were cooperating in the fraud. This could include transferring the ownership of an asset to avoid tax liability. Avoiding paying a third-party creditor can also cause your claim to be denied.
What if I Can’t Afford to Pay the Tax Penalties and Interest?
You could still apply for an Installment Agreement, which Timalyn explained in Episode 10. This assumes you are tax compliant in previous years and the current year.
Timalyn closes this episode with a reminder. Back taxes shouldn’t run your life. She doesn’t want you to serve prison time for your spouse’s tax fraud like the women in the opening of this episode.
As we conclude Episode 14, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Google Podcasts, Spotify, and many other podcast platforms.
Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time. Thanks for listening to today’s episode.
For more information about tax relief options, visit https://www.americasfavoriteea.com/ .
If you have any feedback, or suggestions for an upcoming episode topic, please submit them here: https://www.americasfavoriteea.com/contact.
Disclaimer: This podcast is for informational and educational purposes only. It provides a framework and possible solutions for solving your tax problems, but it is not legally binding. Please consult your tax professional regarding your specific tax situation.