I was emailed a question about Innocent Spouse Relief. This is different from Injured Spouse relief. Information from the IRS can be found in Publication 971. The IRS has the forms and publications you need to research there, or consult with your tax pro. A quick and dirty way to get to the document is here. As I pointed out to my reader, if you are in doubt as to whether you qualify for the Innocent Spouse situation, search and follow the flow chart that is in the document. It is pretty thorough for determining if you are an Innocent Spouse or not.
For those of you living in California, you may want to check out the Franchise Tax Board as well.
They have very clear instructions as to the definition as stated below:
Who is an innocent spouse and how can I get relief of tax?
Who is an Innocent Spouse?
Generally, when a joint tax return is filed, each spouse is equally liable for all the tax, penalties, and interest for the particular joint tax year. This means the entire amount of tax, penalties, and interest may be collected from either spouse, even if only one spouse earned all of the income.
If certain legal requirements are met, a spouse may be fully or partially relieved of the joint tax, penalties, and interest. Six categories of relief are available:
Complete or partial innocent spouse relief.
Relief by separate allocation of liability.
Equitable relief.
Relief from community income.
Relief by court order.
Relief from the tax due amount on return(s) that have been filed.
Please see the following questions and answers for more information.
Under what conditions is innocent spouse relief granted?
To qualify for innocent spouse relief, you must meet all of the following conditions:
You filed a valid, joint tax return.
You are able to prove that when you signed the return, you did not know, or have reason to believe, the liability would not be paid when the tax return was filed, or, at the time you signed the return, you did not have knowledge of the items that resulted in an audit assessment of additional tax.
The liability is attributable to your spouse.
Taking into account all of the facts and circumstances, it would be unfair to hold you liable for the tax.
Under what conditions is relief by separate allocation of liability granted?
Under this type of relief, we determine which spouse is responsible for the tax, penalties, and interest resulting from an audit of a joint return, and assign the liabilities to the responsible spouse. To qualify for this type of relief, you must have filed a joint return and show all of the following:
You were divorced, legally separated, or lived apart for 12 months prior to making your request for relief.
The tax resulting from the audit is attributable to your spouse.
You had no knowledge of the item(s) that resulted in the tax.
You did not receive a direct tax benefit.
You made your request within the applicable statute of limitations, and not later than the date that is two years after the date the Franchise Tax Board has begun collection activities against you.
Under what conditions is equitable relief allowed?
If you filed a joint return, and you do not qualify for traditional innocent spouse or separate allocation of liability relief, you may still be considered for equitable relief from tax that results from an audit or the underpayment of tax on your return. The following are some of the factors considered:
Your current marital status.
Whether you experienced spousal abuse during your marriage.
Whether you had a reasonable belief at the time that you signed the return that the tax was going to be paid; or, in the case of tax resulting from an audit, whether you had knowledge or reason to know of the understatement of tax.
Your current financial situation and your ability to pay the tax liability.
Whose legal obligation it is to pay the tax liability pursuant to a divorce decree or agreement to pay the liability.
Whether the liability is attributable to you or your spouse.
Whether you received a significant benefit from the understatement or erroneous items that gave rise to the liability.
Your compliance with income tax laws in later tax years.
Under what conditions is relief from community income allowed?
You may be entitled to relief from your failure to include community income on your separate return, if all the following conditions are met:
You did not file a joint return.
You did not include an item of community income on your separate return for that taxable year.
You did not know of, and had no reason to know of, that item of community income.
The unreported income was attributable to your spouse.
Under what conditions is relief by court order allowed?
You may qualify for relief by court order if:
You have obtained a divorce from your spouse, and the court issued an order relieving you of the unpaid tax due from a joint liability.
You are in the process of obtaining a divorce and your joint gross income exceeds $150,000 or you owe more then $7,500 for the tax year(s) for which you are seeking relief, send us a letter requesting a Tax Revision Clearance Certificate, which you will provide to the court. After the court issues its order, you will need to provide us with a copy of the court order and we will determine the amount of your relief. In your letter requesting a Tax Revision Clearance Certificate be sure to include your name, address, telephone number, and social security number.
However, please note that the court is limited in the relief that it can provide. The court cannot:
Relieve you of your responsibility to pay tax on your own income.
Provide relief on taxes already paid.
Under what conditions is relief from return tax allowed?
You may be entitled to relief if you filed a joint return and the tax liability is not fully paid, and you show that you had no knowledge, or reason to know, of the non-payment. You must pay the tax on your own income, and you are not entitled to relief on taxes already paid.
Can both spouses request relief?
Yes. To request individual relief, each spouse must file an Innocent Spouse Relief Application (FTB 705).
What will I need to provide with my innocent spouse request?
Generally, we will request that you provide the following documents:
Your statement explaining why you believe you qualify for relief and any documentation that supports your position. Include your name, social security number, and the tax years for which you are requesting relief.
Complete copies of your state and federal tax returns for the years you are requesting relief.
If you have requested relief from the Internal Revenue Service (IRS), please attach a copy of any IRS correspondence responding to your request for relief.
If you are divorced, please attach a complete copy of your divorce decree/marital settlement agreement.
You may request additional documentation based on your specific circumstances.
Am I eligible for innocent spouse relief if I did not sign the joint return?
No. If you did not sign the joint tax return, or we determine the signature on the return is not yours, the joint return is invalid and you are not eligible for innocent spouse relief. You may be held liable for your separate tax liability based on your separate income plus your share of any community income.
My divorce decree states my ex-spouse is responsible for the tax liability. Am I already qualified for innocent spouse relief?
No, the decree is not sufficient to qualify you for innocent spouse relief. But, you may qualify for Court Ordered Relief. To qualify for Court Ordered Relief, the following items must be included in your divorce decree/marital settlement agreement:
A specific reference to California state income tax.
The specific tax years for which you are requesting relief.
The amount or percentage of the total tax liability each taxpayer is responsible for paying.
If you are in the process of obtaining a divorce, please contact this department as soon as possible. We will evaluate your case and advise you regarding the information that needs to be included in your divorce decree or marital settlement agreement. In some cases, you may be required to file a Tax Revision Clearance Certificate with the court. Please note, you will only be relieved of the liability resulting from income that you did not earn, manage, or control. See question 19 for contact information.
Do I have to be divorced to qualify for Innocent Spouse relief?
Not necessarily. For an allocation of liabilities between joint filers, you must be divorced, legally separated from the other party to the joint return, or not living together for the 12-months prior to submitting your request for relief. For Equitable Relief, the fact that a requesting spouse is divorced or legally separated is regarded as a positive factor in determining whether to grant relief.
I received Innocent Spouse Relief from the IRS. Will the Franchise Tax Board automatically grant me relief?
No. You must send us an Innocent Spouse Relief Application (FTB 705), a copy of the IRS determination letter, and a copy of your divorce decree/marital settlement agreement (if applicable). If the IRS granted you relief, we are required to allow similar relief from the state liability, if certain requirements are met.
My refund was applied against my spouse’s liability. Can I file for injured spouse relief?
No. Injured spouse relief is different from innocent spouse relief. An injured spouse situation occurs when a joint tax refund is applied to the separate liability of one of the spouses who filed the joint return, such as past due separate tax liabilities or child support. California law does not have an injured spouse relief provision.
Will the FTB notify my spouse of my request for relief from a joint tax liability?
Yes. We are legally required to notify your spouse (or former spouse) and to allow the non-requesting spouse an opportunity to provide documentation to show why you should or should not be granted relief. We will also notify your spouse of our action on your request and provide the non-requesting spouse with an opportunity to appeal our decision. Upon your request, we will not disclose any of your confidential information, such as your new name and address.
I have a financial hardship and cannot pay my joint tax liability. Do I qualify for innocent spouse relief based on my financial situation?
No. A financial hardship alone does not entitle you to innocent spouse relief. However, your inability to make payment may be a factor considered for granting you equitable relief.
Will the FTB delay collection action if I decide to request relief?
Generally, upon receipt of your written request for relief, all collection activity against you will be suspended. However, interest will continue to accrue while your request is being reviewed.
Will I receive a refund if I am granted relief?
If relief is granted, under certain circumstances, a refund of amounts that you have paid may be allowed.
How do I request Innocent Spouse relief?
File an Innocent Spouse Application and attach a written statement explaining why you feel you qualify for relief. You can download the application from our Website, or we will mail one to you upon request. Call (916) 845-7072 (Monday thru Friday 8 am-5pm), or write to us at:
Franchise Tax Board MS A-452
Innocent Spouse Program
PO Box 2966
Rancho Cordova 95741-2966
Assistance in Spanish is also available.
If you have any additional questions, you can call the Innocent Spouse Program at (916) 845-7072 to discuss your specific case and circumstances.
Will you deny me relief if I do not provide the information you request?
We will base our decision on all of the information available to us. It is very important that you provide us with any information you have that supports your request for relief. We cannot act favorably on your request if we do not have enough information to conclude that you are entitled to relief.
Where can I get more information on the IRS Innocent Spouse Program?
Refer to IRS Tax Information for Innocent Spouses
****
Again, this is different than being an Injured Spouse and I will try and blog on that next.
Consult your favorite tax professional and as always, since you are the one signing the tax returns, please do your own due diligence.
Kim Greenblatt
You are in Kim Greenblatt’s profitable blog learning what an Innocent Spouse is.