This is the most commonly known form of relief, which can absolves a taxpayer from liability if their spouse or former spouse either did not report income, made an error in the calculation of income, or misapplied any deductions or credits that they were not entitled to. Innocent Spouse Relief relieves a person of any tax, interest, and penalties associated with the account based on the preceding errors. However, the taxpayers are still held jointly and severally liable for any amounts that are not granted innocent spouse relief. The following requirements must be met in order for IRS innocent spouse relief to be granted.
1. You filed a joint return
2. There is an understated tax on your return, i.e. the IRS determines that your total tax should be more than the amount that was actually shown on your return.
3. That amount is due to erroneous items of your spouse
4. You can show that when you signed the joint return you did not know, and had no reason to know, that the understated tax existed (or the extent to which the understated tax existed (Absence of “Actual Knowledge” or “Reason to Know”).
5. Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understated tax. (“Unfairness”).
What is Actual Knowledge?
The actual knowledge or reason to know test is governed by the principal that the IRS will not deem you an innocent spouse if you were aware of the tax deficiency at the time the return was filed. That knowledge, in the government’s eyes would make you an accomplice to the understatement of tax. Because proving an individual’s actual knowledge can be difficult, the government eased its burden and only has to prove that a person should have had “reason to know” of the deficiency. Reason to know is often referred to as willful blindness in other areas of the law and the IRS will consider all the facts and circumstances surrounding a liability when determining whether innocent spouse relief should be granted. Among the things that the IRS will consider when determining actual knowledge for IRS innocent spouse relief purposes:
Our best stuff: secrets, tax saving tools, and tax defense strategies from the braintrust at Brotman Law.
These ten big ideas will change the way you think about your taxes and your business.
Find the articles and videos you need to make the right tax decisions in the learning center.
It is not just about what we do, but who we are, why we do it, and how that benefits you.
Meet with us to outline your strategy. No further obligation, 100% money-back guarantee.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, I must inform you that any U.S. federal tax advice contained in this website is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter contained in this website.