Innocent Spouse Relief (Video)

Watch our newest video to learn about the types of Innocent Spouse Relief!

What do we mean by the term “Innocent Spouse?” In the tax world, this happens when a couple files a joint return, and one spouse feels that they should not be responsible for the tax. There are three types of relief for the innocent spouse:

1. Traditional Innocent Spouse

This happens when there is an understatement of income on a tax return, and the innocent spouse did not know, or have reason to know, about the understatement. It is inequitable to hold them responsible for the tax regardless of whether they are married or divorced. They must, however, request relief within two years of the start of IRS collections.There will be an allocation of the liability. This means that there is no free pass for the innocent spouse. 

2. Separation of Liability

This happens when there is an understatement of income on a tax return. The two spouses must have been divorced, or legally separated for at least 12 months. In this case, they must request relief within 2 years of the start of IRS collections. The ex-spouses involved will be treated as married filing separately. The tax debt will be allocated based on who earned the income; or who owns the assets that are the source of income. Usually, this provides the better answer for our clients. 


3. Equitable Relief 

This happens when there is an understatement of income on a tax return; or the tax is correct, but unpaid. In this case, there is no requirement to file for equitable relief within two years. Given all the facts and circumstances, it is simply inequitable to hold the spouse responsible. The IRS will also consider marital status, economic hardship, knowledge or reason to know, abuse, physical or mental health, and financial dominance in the case of Equitable Relief. Liability will be allocated among the spouses. 


There is also relief for the Injured Spouse. This situation occurs when the couple files a joint tax return, and then some or all on an expected joint refund was taken to pay the other spouse’s tax liability. For example, the IRS takes part of a tax refund related to child support. The IRS will then give you your share of the money back. 

If you would like to watch our YouTube video on this topic, click here!

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Founded by Gary Massey, Massey and Company is a boutique CPA firm in located in Atlanta, Georgia serving the needs of small businesses and their owners.