Spouses who file joint federal and state tax returns are “jointly and severally liable” for the total amount of taxes due, such that the Internal Revenue Service can seek to collect the tax due from either spouse to satisfy the entire tax liability. The IRS can also seek to collect any interest and penalties assessed after a tax filing, including civil or criminal penalties.
To avoid being held responsible for the other spouse’s purposeful understatement of taxes owed, a spouse filing tax returns jointly can claim that he or she is an “innocent spouse”, i.e., unaware of any understatement of income, such as for unreported income or taking deductions are that not permitted, and that there were no circumstances to make him or her suspicious of the income that was reported in that tax year by the spouse. This relief is permitted even if the parties are still married and residing together.
In the alternative, spouses who are widowed, divorced, legally separated or have lived apart for at least one year can also qualify as innocent spouses and limit their liability for deficiencies on the tax returns during those years, caused by the other spouse. Because it can be difficult for an innocent spouse to prove that he or she had no knowledge of any fraudulent activities conducted by the other spouse, a spouse may elect to limit liability for any deficiency on the joint tax return to that spouse’s allocable portion of the deficiency. In such cases, the tax deficiency will be allocated between the spouses as if they had filed separate tax returns.
In order to obtain innocent spouse relief, a Request for Innocent Spouse Relief form, IRS form 8857, must be timely filed with the IRS within two years after the IRS begins trying to collect the owed tax debt.
