Taxes
Joint Tax Returns and Innocent Spouse Relief
This information last reviewed: 11/2/2011

Did you know that, even if you are married, you do not have to file the same tax return as your spouse? You can choose to file jointly or separately. There are pros and cons to each method of filing, depending on your individual circumstances. (See the table at the end of this article for more information on each option.)

Filing a joint return

Filing a joint tax return means more than just signing your name at the bottom of the return. If you file a joint return with your spouse and the information is false or wrong, the IRS has the right to collect the tax that is due from either of you because you both signed the return. The IRS does not have to try to figure out who made the mistake or who failed to report all income. The government may take legal action against both spouses together or either spouse individually. Even if you have since divorced or separated, the IRS has the right to choose which way they will try to collect the tax. The IRS is not bound by the order of a divorce decree stating that one spouse must pay all the taxes. If you decide to file a joint tax return, it is clearly in your best interest to carefully review the return before you sign it, since you can be held liable for everything in it.

What do I do if I’ve filed a joint return and am held responsible for my spouse’s or former spouse’s error?

There are three ways in which you can be relieved from paying taxes if you believe you are not responsible for a mistake related to a joint return. In each situation, you must file an IRS Form 8857 as soon as you become aware of the mistake or problem. The Form 8857 must be filed no later than two years after the date on which the IRS first attempts to collect the tax.

Option 1: Innocent Spouse Relief

The first way that you can be relieved from responsibility for paying taxes is by way of innocent spouse relief. To qualify for this relief, you must meet the following conditions:

  • You must have filed a joint return. That return must contain an understatement of tax directly related to your spouse’s (or former spouse’s) unreported income, or your spouse’s or former spouse’s incorrect deductions or credits;
  • You must show that, at the time you signed the return, you did not know and had no reason to know that there was an understatement of tax; and
  • You must show that, taking into account all the facts and circumstances, it would be unfair to hold you liable for the unpaid tax.

The IRS will consider all of the facts and circumstances of each case to determine whether it is unfair to hold you responsible. Some factors that the IRS considers are as follows:

  • Whether you benefited from the understatement;
  • Whether your spouse, or former spouse, deserted you; and
  • Whether you have been divorced or separated.

The IRS will not grant your request for innocent spouse relief if they prove that you and your spouse (or former spouse) transferred property to one another or a third party, such as a creditor, ex-spouse, or business partner, with the intent of defrauding the IRS.

Option 2: Relief by Separation of Liability

The second way that you can be relieved of responsibility for paying taxes is by way of relief by separation of liability. To request relief by separation of liability, you must have filed a joint return, and prove that:

  • You are widowed, divorced, or legally separated from the spouse with whom the joint return was filed; and
  • You were not a member of the same household as this spouse at any time during the 12-month period prior to the date the request for relief was filed.

Under this type of relief, the IRS holds each spouse responsible for a portion of the unpaid tax, depending on the facts of the individual situation. The relief discussed here will not apply to any part of the understatement if you knew about the mistakes on the tax return.

Note: There is a domestic abuse exception. Even if you knew about the errors on the tax return, you may still qualify for relief by separation of liability if you were the victim of domestic violence before signing the return, and if you did not challenge the information on the return because of fear of retaliation.

Option 3: Equitable Relief

The third way that you can be relieved of the responsibility for paying taxes is by way of equitable relief. Equitable relief is intended to help people who do not qualify for either of the first two options. To qualify for equitable relief, you must meet all of the following conditions and prove that:

  • You are not eligible for innocent spouse relief or relief by separation of liability.
  • You and you spouse or former spouse did not transfer assets to each other as part of a fraudulent scheme.
  • Your spouse or former spouse did not transfer property to you to avoid the payment of tax.
  • You did not file or fail to file a return with the intent to commit fraud.
  • You did not fail to file a return with the intent to commit fraud.
  • You did not pay the tax.
  • Taking into account all the facts and circumstances, it would be unfair to hold you responsible for the unpaid tax.
  • Your spouse or former spouse supplied the incorrect or incomplete information entered on the tax form.

Where can I go for more help?

The IRS can be very cynical when reviewing your claims for relief. For that reason, whenever possible, it is always best to use a professional when seeking tax relief. Legal Services of New Jersey’s Tax Legal Assistance Project may be able to assist you. Call LSNJ-LAW™, Legal Services of New Jersey’s statewide, toll-free legal hotline, at 1-888-LSNJ-LAW (1-888-576-5529) and state that you need help with a tax situation. Hotline hours are Monday through Friday, 8 a.m. to 5:30 p.m. If you are not eligible for assistance from Legal Services, the hotline will refer you to other possible resources.

Type of return

Pros

Cons

Married filing jointly

Lower tax rate

Each spouse is responsible for the payment of the tax

 

All income, deductions, and credits are reported on one return

After you file the return, you cannot change to the filing status of married filing separately

 

 

To get relief from payment of tax, interest, or penalties, you must apply for relief from the IRS

Married filing separately

You are only responsible for the tax due on your income, and you are not obligated to pay tax on income your spouse earned

Higher tax rate

 

After you file, you can change your mind and change your filing status to married filing jointly

You cannot take the credit for child and dependent care expenses

 

 

You cannot take the Earned Income Tax Credit

 

 

The child tax credit, retirement savings contribution credit, itemized deductions, and the deduction for personal exemption are all reduced

 

 

If your spouse itemizes deductions, you cannot Claim the standard deduction