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Break free of back taxes with this unique IRS tax debt forgiveness
When it comes to back taxes, the IRS doesn’t let an unpaid debt go easily. In truth, there are very few ways to qualify for tax debt forgiveness – even partial forgiveness. That makes Innocent Spouse relief unique, because it’s one of the few ways you can qualify for full tax forgiveness.
Innocent Spouse is a status that you can apply for through the IRS. If you qualify, it means the IRS lets you off the hook for back taxes owed on joint filings. You can only get this if you can prove that your spouse or former spouse incurred tax debt without your knowledge.
But Innocent Spouse takes more than just proving your spouse filed and that you weren’t aware of the details. You must be able to show that your spouse did any of the following without fully informing you of the action:
It’s up to you to prove to the IRS that your spouse acted without your knowledge or consent. That can be tricky to pull off, especially when you signed the return.
There are two other forms of IRS tax debt relief for spouses:
In addition, there is also a status called “Injured Spouse.” This happens when someone garnishes your refund on a debt solely owed by your spouse. For example, if your spouse owes child support and they garnish your joint refund, you can file for Injured Spouse.
The IRS explicitly states that they, “consider all of the facts and circumstances of the case in order to determine whether it is unfair to hold you responsible for the understated tax.”
That essentially means that they get into your business to make sure that your spouse did this behind your back. If you are still married and received a benefit from the understatement, the IRS will likely reject your claim.
Whether you benefited from the spouse’s bad filing AND the status of your marriage matter when you file for Innocent Spouse.
For both Innocent Spouse and Separation of Liability, you must apply within two years of the initial IRS collection attempt. For Equitable Relief, the IRS must receive your request during the collection period. Injured Spouse only applies for the statute of the refund; that’s generally three years after the return or two years after a payment.
So, if you owe back taxes from a few years ago, separate and then file for Innocent Spouse, it won’t count. This basically only applies during separation and divorce at the end of a marriage.
Even if you can prove you had no knowledge of income understatements or over-claimed deductions, you could still be liable. There’s a section in Publication 971 that outlines eligibility titled “Actual Knowledge or Reason to Know”
This states that if a reasonable person in a similar situation would have known about the issues, you are liable. So, even if you didn’t know, if you should have known then it counts.
Article last modified on August 8, 2019. Published by Debt.com, LLC