A joint return makes both spouses responsible for the full tax, including tax on income or deductions that only one spouse knew about. Section 6015 of the Internal Revenue Code allows a spouse or former spouse to request relief in certain circumstances. This article explains the types of relief, who may qualify, how to make a request, and the deadlines.
Why Relief May Be Needed
Under section 6013(d)(3), liability for tax on a joint return is joint and several, so the IRS may collect the entire amount from either spouse. According to IRS Publication 971, that remains the case even if the spouses later divorce and the divorce decree makes the former spouse solely responsible for the tax.
For example, suppose spouses file a joint return that reports one spouse’s wages, and the other spouse leaves off income from a side business. If the IRS later assesses additional tax on the omitted income, both spouses are liable for it. The spouse who did not earn that income may request relief, and whether relief is available depends on the rules below.
The Types of Relief
Innocent spouse relief (section 6015(b)). Available when the understatement of tax is attributable to erroneous items of the other spouse, such as unreported income or an incorrect deduction, credit, or basis. The requesting spouse must show that, when signing the return, he or she did not know and had no reason to know of the understatement, and that holding him or her liable would be inequitable under all the facts and circumstances.
Separation of liability relief (section 6015(c)). Allocates an understatement between the spouses as if they had filed separately. It is available only to a requesting spouse who, at the time of the request, is divorced or legally separated from the other spouse, or who was not a member of the same household as the other spouse at any time during the preceding 12 months. It does not apply to items the requesting spouse actually knew about, and the IRS bears the burden of proving that knowledge.
Equitable relief (section 6015(f)). Available when the other types of relief are not, if it would be inequitable to hold the requesting spouse liable. Unlike the other two, it can apply to tax that was correctly reported on the return but not paid.
Relief from community property laws (section 66(c)). Separate rules apply to spouses in community property states, including California, who did not file a joint return.
What the IRS Considers
For equitable relief, Publication 971 lists factors including marital status, economic hardship, whether the requesting spouse knew or had reason to know of the item or that the tax would not be paid, legal obligations under a divorce decree or agreement, whether the requesting spouse significantly benefited, later compliance with tax laws, and mental or physical health. Publication 971 also explains that a history of abuse may cause some factors to weigh in favor of relief.
On the question of reason to know, the IRS looks at circumstances such as the requesting spouse’s education, any deceit or evasiveness by the other spouse, involvement in the activity and in household finances, financial expertise, and any lavish or unusual spending.
How to Request Relief
All three types of relief under section 6015 are requested on Form 8857, Request for Innocent Spouse Relief. The request should explain the facts in detail and include supporting documents. The IRS contacts the other spouse or former spouse to ask whether he or she wants to participate, and both spouses generally have the right to appeal the IRS’s decision within the IRS within 30 days of the determination letter.
If the matter later goes to the Tax Court, the Court’s review is generally limited to the administrative record created at the IRS stage, plus newly discovered or previously unavailable evidence. A complete Form 8857 submission matters.
Deadlines
Innocent spouse and separation of liability relief. The request must be made no later than two years after the IRS begins collection activities against the requesting spouse. Publication 971 lists examples of collection activity, including an offset of the requesting spouse’s refund with notice of the right to file Form 8857, a notice of intent to levy under section 6330, a suit to collect, and the filing of a claim in a court proceeding, such as a bankruptcy proof of claim.
Equitable relief. For an unpaid balance, the request must be made within the period the IRS has to collect the tax, generally 10 years from assessment. For a refund, it must be made within the refund claim period, generally three years after the return was filed or two years after the tax was paid, whichever is later.
Tax Court. A requesting spouse may petition the Tax Court after receiving a final determination letter, or after six months if the IRS has not issued one, and no later than 90 days after the final determination letter is mailed.
Liable for a spouse’s tax debt?
Tax attorney Cassra Minai, Esq. can review your situation and the options under section 6015 in a confidential consultation.