Many married couples file taxes jointly. Unfortunately, sometimes one spouse makes a mistake or intentionally lies on a tax return and the other spouse who signs the returns is not aware of the incorrect information. Because the innocent spouse’s signature is on the tax form and the couple owes taxes together, the innocent spouse who is unaware of the underpayment of taxes could end up owing back taxes and be subject to tax collection efforts as a result.
In some cases, however, there is an exception. The spouse who is unaware of the incorrect info on the tax return may be granted innocent spouse status and absolved of financial responsibility for the other spouse’s unpaid tax debt. Recent rule changes have been proposed that affect the process of filing for innocent spouse status, although the protections remain the same for the program. When you work with Boca Raton tax relief services for help, your tax advisor will be up-to-date on the latest rule changes and will help to ensure you provide the information you need to seek relief.
Innocent Spouse Status to Avoid Tax Debt Responsibilities
In order for a spouse to claim innocent spouse relief, the person making the claim must prove that he or she was unaware that income taxes were underpaid. The IRS rejects claims if the innocent spouse benefitted from the avoidance of taxes or if the innocent spouse has waited too long. In most cases applying for relief must be done within two years of the time the first collection notice was received from the IRS, which can be a problem when the spouse who lied on the returns hides the notice or, in other situations, when the innocent spouse is a victim of domestic abuse and is afraid to request relief.
The IRS receives more than 50,000 applications for relief every year under the innocent spouse program. Fewer than half of all requests for relief are granted by the IRS. This past November, however, the IRS released proposed regulations to offer more detailed rules governing the innocent spouse program. The new rules reflect changes made by the Tax Relief and Health Care act of 2006 and reflect changes that arose as a result of court decisions in litigation.
The proposed rules provide more guidance on how res judicata applies in innocent spouse cases. Res judicata is a legal doctrine preventing a spouse from requesting innocent spouse relief from tax obligations if such relief was at issue in a prior court proceeding or if the innocent spouse participated in a court hearing in some meaningful way but did not raise the issue of innocent spouse relief even though he or she could have. The IRS has now clarified exactly what it means to participate meaningfully in past cases such that innocent spouse relief can no longer be sought.
This change is just one of several that the IRS has put forth to alter how the innocent spouse program works. Our tax relief services are here to help innocent spouses submit a request for relief in a timely manner before it becomes too late to take advantage of the protections the program provides. Call East Coast Tax Consulting Group today to learn more about innocent spouse status.