Page 66 - Family Law Services

1. Innocent spouse relief

2. Separate liability

3. Equitable relief

Innocent spouse relief. By requesting innocent spouse relief, a taxpayer can be relieved of responsibility
for paying tax, interest, and penalties if his or her spouse (or former spouse) improperly reported or
omitted items on his or her tax return. Generally, the tax, interest, and penalties that qualify for relief can
only be collected from the spouse (or former spouse). However, the taxpayer is still jointly and severally
responsible for any tax, interest, and penalties that do not qualify for relief. The IRS can collect these
amounts from either the taxpayer or spouse (or former spouse).

The following four conditions must apply to qualify for innocent spouse relief:

1. A joint return was filed.

2. There is an understated tax on the return that is due to erroneous items of the other spouse (or
former spouse).

3. The taxpayer requesting relief did not know, and had no reason to know, that the understated tax
existed (or the extent to which the understated tax existed).

4. Taking into account all the facts and circumstances, it would be unfair to hold the taxpayer re-
questing relief liable for the understated tax.

Separate liability election. Under this type of relief, the understated tax (plus interest and penalties) on
the joint return is allocated between the taxpayer and spouse (or former spouse). The understated tax al-
located to the taxpayer is generally the amount for which he or she is responsible. To qualify, at the time
Form 8857 is filed, the requesting taxpayer must be either no longer married to, legally separated from,
or living apart from (for at least 12 months) the person with whom the joint return was filed. The tax-
payer has the burden of establishing the allocation. This type of relief is available only for unpaid liabili-
ties resulting from understated tax. Refunds are not allowed.

Equitable relief. If a taxpayer does not qualify for innocent spouse relief or separation of liability relief,
he or she may still qualify for equitable relief.

Unlike innocent spouse relief or separation of liability relief, the taxpayer can request equitable relief
from an understated or underpaid tax. An underpaid tax is the amount of tax properly reported on the re-
turn but has not yet been paid.

A taxpayer may qualify for equitable relief if he or she meets all the following conditions:

• He or she is not eligible for innocent spouse relief, separation of liability relief, or relief from li-
ability arising from community property law.

• He or she has an understated or underpaid tax.

• He or she did not pay the tax.

64 © 2020 Association of International Certified Professional Accountants