Your Spouse is Shady and Now You’re Stuck With the Tax Debt: Enter Innocent Spouse Relief

Imagine this: You sign off on and file a joint tax return with your spouse, trusting the numbers your spouse provided. Before you know it, the IRS has audited the return, found that your spouse hid income and now they’re after you for a tax debt you had nothing to do with.

It feels completely unfair.

And you do have an option.

Enter Innocent Spouse Relief—a provision of IRS administrative law that relieves you from joint and several tax debt created by your spouse that you knew nothing about.

What Does “Joint and Several” Liability Even Mean?

When you file a tax return married filing joint, you and your spouse are BOTH responsible for the full amount of the taxes owed. This is called “joint and several liability.” The IRS can’t collect more than the balance owed, but they can go after either of you, one of you, or both of you to collect the full tax debt.

Imagine how unfair this feels. You're only responsible for the tax debt because your spouse hid income or or took deductions or credits they didn't qualify for.

Now the IRS is breathing down your neck and threatening to levy YOUR bank account.

Save Yourself with Innocent Spouse Relief

You feel hopeless when you realize you owe tax debt because your husband or wife were up to no good. You assume you have no way out.

Understanding your right to request Innocent Spouse Relief could be a game changer.

By understanding Innocent Spouse Relief, you can protect yourself from being unfairly held liable for your spouse’s tax errors (aka lies).

Two Pathways to Relief

There are two main concepts to know about if you find yourself in this situation: Injured and Innocent Spouse Relief.

1. Injured Spouse Relief

If your refund is taken because of a tax debt created by your spouse or ex spouse’s failure to tell the truth, you can file an Injured Spouse Claim.

You’re telling the IRS that they should not take your refund for a tax debt because you didn't create it and were unaware the return didn't tell the full truth.

You may be eligible for injured spouse relief if:

• You filed a joint return with your spouse
• Your tax refund was applied to your overdue debts
• You weren't responsible for the tax debt

If the IRS agrees, injured spouse relief lets you get your refund back.

You must request injured spouse relief within 3 years from date the return was filed or 2 years from the date the tax was paid, whichever is later. If you didn't file a return, you must file within 2 years of the date the tax was paid.

2. Innocent Spouse Relief

Innocent Spouse Relief can save you from having to pay a tax debt created when your spouse (or ex) underreported income or claimed improper deductions and/or credits. It’s your get out of jail free card if you genuinely had no knowledge of your spouse’s shady dealings.

Criteria for Innocent Spouse Relief

Innocent spouse relief can help but not everyone qualifies.

Here’s what you need to prove:

1. You and Your Spouse Filed a Joint Return Where You Owed More Than the Return Showed: Your joint return must have understated how much tax you owe because your spouse didn’t tell the truth (or made errors…sure).
2. Unaware of Understatement: When you signed the joint return, you didn’t know (and had no reason to know) about what your spouse tried to get away with.
3. Unfair to Hold You Liable: Considering all the circumstances, it would be unfair to hold you responsible for the tax debt owed.
4. Timely Request: You must ask for Innocent Spouse Relief within two years after the IRS assesses the taxes owed.

Real-Life Scenario: A Side Hustle and Tax Trouble

Let’s look at a simple real world scenario.?

Let’s say your spouse has a side hustle and they’re paid in cash. You know about it but as far as you know it’s a minor gig. In reality, however, this "minor gig" brings in big bucks and your spouse grossly underreported his income on your joint tax return.

You sign the tax return because your spouse tells you everything's there. You have no clue that your spouse is lying about their income. You have kids to take care of and you’re trying to run the household and your lifestyle hasn’t changed in any meaningful way by an influx in income. In other words, you’re not at all aware of how much money your spouse actually made that year.

When the IRS discovers the extra income, they audit the return which ends up showing a much higher tax liability and serous accuracy related penalties. The IRS begins sending collection notices to BOTH of you threatening to levy your bank account, garnish your wages and seize your assets.

After all, the tax debt owed is from a married filing joint return which you signed.

The reality is you genuinely didn’t know anywhere close to how much extra income there actually was and relied on what your spouse told you when you signed the return. If the IRS finds that it was unreasonable to expect you to have known about the underreported income and unfair to hold you liable, the IRS may let you off of the hook.

TL;DR: Your Quick Guide to Innocent Spouse Relief

• Joint and several liability: You and your spouse are both responsible for the entire tax debt from a return you filed jointly.
• Injured Spouse Claim: You can claim that your tax refund should not be or have been taken for tax debt your spouse was responsible for.?
• Innocent Spouse Relief: You can ask the IRS to free you from liability for tax debt owed on a joint return because you were not aware of the income that wasn’t reported or deductions/credits your spouse took on the joint return even though you weren’t eligible.?
• Criteria to Qualify: You must meet specific criteria including lack of knowledge about the errors on the joint return, a determination that it would be unfair to hold you responsible, and the request for relief was filed on time.

Your spouse’s tax errors (which you know are actually lies) should not ruin your financial future.?

Innocent Spouse Relief can save you from owing tax debt that your spouse created without your knowledge.

Take advantage.

PS: Have you ever been blindsided by tax debt you now owe because of something your spouse did either in error or because they tried to pull a fast one on a tax return??

Did you file a request for Innocent Spouse Relief?

Tell me about the experience in the comments below.

Let’s discuss!

And thanks for reading!