Divorce and Federal Income Taxes: Innocent Spouse Relief

I’m Divorced, My Spouse Filed a Bad Tax Return, The IRS Says I’m Liable?

Unfortunately, you may not be able to stop your spouse from filing or you simply may not even be aware that your spouse filed a tax return as joint and claiming the benefits that filing as joint allows. Of course, there you wondering what to do when you get the inevitable notice from the IRS of a tax liability, penalties, and interest because your spouse erroneously or even fraudulently claimed certain deductions, credits, gifts, distributions of income, or otherwise underreported income and filed a joint return.

In such event, the IRS may have taken a refund paid to your spouse that otherwise would have been due to be paid to you and used it to satisfy your spouse’s past due taxes, child support, federal student loan, or other federal debts then you may qualify as an injured or “innocent spouse.”

This is an unfortunate consequence of Texas being a community property state: you as a spouse may become liable for taxes required to be paid as a result of your spouse filing a joint return and who either committed fraud or made a mistake on the return and a federal tax liability arose as a result. This is true regardless of whether your divorce decree state that your spouse is responsible for any amount due on the tax return in question, because the IRS is not bound by the terms of the Decree of Divorce rendered by a district court in the State of Texas. The IRS, rather, is governed by federal law and one thing we all know is true: death and taxes, so the IRS is going to get their money.

Innocent Spouse Rule

So, what to do? The spouse is not aware of this fraud or mistake is termed an “innocent spouse”.

The “innocent spouse rule”, allows a spouse who was not aware of the liability created in a given tax year as a result of fraud or mistake by their spouse on a joint return. If you are able to successfully prove your innocent spouse status under the rule, the IRS may completely relieve you of the obligation to pay any of the liability created by your spouse’s fraudulent or erroneous filing, including any penalties or interest.

Qualifying as an Innocent Spouse

To seek this innocent spouse relief, the IRS will look to see if the following conditions are met:

1. A joint tax return as in fact filed for the tax year in question;
2. An understatement of tax exists as a result of the mistake or fraud;
3. The spouse claiming innocent spouse status can establish that he/she did not know and had no reason to know of the mistake or fraud;
4. That it would be inequitable to hold the innocent spouse liable;
5. And the spouse claiming innocent spouse status timely files IRS form 8857 with the IRS.

If you believe you may need to seek to qualify as an innocent spouse and avoid a tax, penalty or interest as a result of your spouse’s fraudulent or erroneous filing, you need to file IRS Form 8857 immediately as you first become aware of a tax liability you believe that only your spouse or former spouse should be liable due to their mistake or fraud. While historically there was a 2-year time limitation on the filing of this form, new rules adopted by the IRS recently have lifted in most cases this 2-year limitation. However, you should seek the advice of an Austin Divorce Attorney or a competent tax professional in this circumstance. Regardless, do not delay for any reason to file IRS Form 8857, otherwise, you could forfeit your rights as an innocent spouse and be subject to taxes, penalties, and interest due to the fraud or mistake of your spouse’s filing.

Where to File Innocent Spouse Form

Our Austin Divorce Attorneys can assist you with the filing of the innocent spouse relief form. The Innocent Spouse Relief Form may be filed by mailing the form as follows:

Internal Revenue Service
Innocent Spouse
Stop 840-F
P.O. Box 120053
Covington, KY 41012

Or you can fax the form to the IRS at 855-233-8558.

Please note, that this form must be filed with the IRS and should not be filed with the Court where your divorce, if applicable, was granted. The issue of your qualifying as an innocent spouse is one of the IRS and not with a divorce court. Of course, you should check the IRS website to confirm any changes to this contact information.

Contact Us Today For Professional Advice on Innocent Spouse Protection

Our Divorce Attorneys serve clients in Williamson County, Travis County, Bastrop, and Hays Counties as well. Our Austin Divorce Attorneys offer a free consultation and oftentimes can make arrangements to work through phone conference or electronically, such as Skype, if necessary. Put the extensive experience of Austin, Texas divorce attorney James W. Evans to work for you. Call us today at (512) 628-2550 to discuss your case, or call Mr. Evans at (512) 628-2571 to reach his direct office line. He can also be reached at his cellular number (512) 689-8319, or emailed at service@evansflg.com.