Need an Innocent Spouse Relief Lawyer in New Jersey?

When a couple files a joint return, both spouses are normally liable for any taxes owed. However, if your spouse erroneously reported income, expenses, or credits and deductions and it led to a tax debt, and you did not know about the error(s), you may be able to apply for innocent spouse relief. Contact the experienced attorneys at Rosenblum Law for a free consultation, and keep reading to learn more about this option that could save you thousands of dollars.

Eligibility Criteria for Innocent Spouse Relief

In general, to qualify for innocent spouse relief:

• The couple must have filed a joint return.
• Taxes owed must have been understated due to errors on the return.
• The spouse applying for innocent spouse relief must show they did not know, and had no reason to know, about the errors.

Note that if one spouse was intimidated by threats of domestic violence into signing a joint return even though they knew the return was incorrect, relief may still be possible.

Someone is not eligible for innocent spouse relief for any tax year in which:

• They signed an offer of compromise with the IRS or signed a closing agreement.
• They appeared in tax court and did not request relief.
• A court denied relief.

Types of Innocent Spouse Relief

There are three types of innocent spouse relief.

Traditional innocent spouse relief means a spouse is not responsible for any of the joint tax debt. 

Separation-of-liability relief means a spouse is only responsible for paying their share of the joint tax debt. For separation-of-liability relief to apply, the couple must no longer be married or must not have lived together for at least one year prior to one of them requesting relief. 

Equitable relief relieves one spouse from paying the other’s share of joint tax debt based on a number of factors having to do with fairness:

• Marital status
• Economic hardship that may be suffered without relief
• Whether one spouse significantly benefited from the understated tax
• Whether one spouse complied with tax law when asked to do so
• Each spouse’s mental and physical health

To successfully apply for any type of innocent spouse relief, the applicant spouse must demonstrate that they should not have known or had reason to know of the understated tax. 

Common Scenarios Leading to Innocent Spouse Relief Claims

Here are four common scenarios leading to innocent spouse relief claims. 

• Unreported Income: When one spouse fails to report income that the other is not aware of 
• Improper Deductions or Credits: When one spouse claims improper deductions or credits that other is not aware of 
• Fraudulent Tax Filings: When one spouse files a fraudulent joint return without the other’s knowledge 
• Domestic Abuse: When one spouse threatens or intimidates the other into signing a fraudulent joint return 

The Process of Applying for Innocent Spouse Relief

Filing the Request

Someone should file for innocent spouse relief using IRS Form 8857 as soon as they find out about the unreported tax debt, such as through a collection notice or notice of understated taxes. In most cases, the time limit for filing is two years from the date that the IRS begins collection efforts. For equitable relief, the form must be submitted within 10 years of the tax year in question. 

Legal Standard

When applying for innocent spouse relief, the applicant must prove that they did not know and had no reason to know about the tax discrepancy. Whether they had reason to know is based on:

• The applicant’s level of education
• The applicant’s involvement in financial affairs
• The presence of expenditures that exceed previous standard of living
• The other spouse’s history of deceitful financial practices

The burden of proof lies with the spouse requesting relief. This is why it is important to have a tax attorney who can explain what documentation and evidence are needed to prove that there was no reason to know about the discrepancy. 

IRS Review Process

The IRS will review the application and any documentation provided to determine if the applicant knew about the tax discrepancy or had reason to know. 

After review, the IRS will send a determination letter that provides or denies some form of innocent spouse relief. The determination may be appealed to tax court within 90 days. 

How an Attorney Can Help an Innocent Spouse Obtain Tax Relief

An experienced attorney can help someone applying for innocent spouse relief in a number of ways.

• Assessing Eligibility: An attorney can evaluate the strength of the case and provide guidance on next steps. They can also explain the spouse’s rights under tax law.
• Preparing the Application: The attorney can assist in preparing the application form and ensure that all necessary documents are included. 
• Representation During IRS Communication: If the IRS requests additional information, the attorney will assist in providing it. In addition, the attorney can represent the spouse in tax court if an appeal is necessary. 

Alternatives to Innocent Spouse Relief

There are some alternatives to innocent spouse relief. For example, an Offer in Compromise is a way to settle tax debt for less than what is owed. For an offer in compromise, one must show income, expenses, asset equity, and ability to pay. Another option is to enter into a payment plan with the IRS for the tax debt. A payment plan stops collection efforts as long as the payments are made according to the schedule.

FAQs

Contact Rosenblum Law Today

Understanding and applying for innocent spouse relief is a complex process that requires expert assistance. An attorney can help you understand your rights under tax law, assist with preparing the application, and determine how to prove your case.

Rosenblum Law has experienced attorneys who understand innocent spouse relief and have helped many clients apply for it successfully. Contact us today for a free consultation.