FAQ on Innocent Spouse and Equitable Relief: Part II

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Struggling to deal with the IRS after your partner made huge tax mistakes? Things might not be as hopeless as they seem.

If you secure innocent spouse or equitable relief, you may not need to pay penalties related to your partner’s errors. Unfortunately, many seemingly deserving spouses do not qualify for these programs.

In the first part of this blog series, we highlighted the main differences between innocent spouse and equitable relief. Now, we’ll clarify who, exactly, is allowed to take advantage of these opportunities.

Who is eligible for innocent spouse relief?

Eligibility standards for innocent spouse relief are strict:

  • Your joint tax return includes an understatement resulting from your spouse’s errors.
  • At the time you signed the return, you didn’t realize that an understatement existed.
  • You haven’t purposefully worked with your spouse to fraudulently transfer assets.

In addition to clearing these hurdles, you’ll need to provide compelling evidence of your status as an “innocent spouse.” The IRS will examine this to determine whether it would be unfair to hold you accountable for your partner’s errors.

While the agency takes many factors into account, your marital status (divorced or separated) can come into play, as can any financial benefits you’ve received due to a current or former spouse’s tax mistakes.

Who is eligible for equitable relief?

As we mentioned in part I, equitable relief is designed for those who don’t qualify for programs such as innocent spouse or separation of liability. Beyond this, many of the conditions for equitable relief echo innocent spouse relief:

  • You didn’t intend to commit fraud while filing (or failing to file) tax returns.
  • You believe it would be unfair to hold you liable for underpayment (or understatement) of taxes.
  • You and your partner (or previous partner) did not take part in a scheme involving the fraudulent transfer of assets.
  • You did not pay the tax in question — unless you qualify for a few select refund-related exceptions highlighted by the IRS.

As you determine whether you qualify for innocent spouse or equitable relief, don’t hesitate to get a tax expert in your corner. Our team at the Highland Tax Group would be happy to help you secure the relief you need. Reach out today to get started.