Understanding Innocent Spouse vs. Injured Spouse: A Guide for Taxpayers

When dealing with complex tax issues, it is essential to know your rights and options. Two commonly confused terms in the tax world are “innocent spouse” and “injured spouse.” While they sound similar, they serve different purposes and apply in distinct situations. This brief guide will clarify the differences between innocent spouse and injured spouse relief.

Innocent Spouse Relief

When you file a joint return with your spouse, both parties are responsible for the tax and any interest or penalty due. Innocent spouse relief is a provision for individuals who file joint tax returns with their spouse but later discover errors, omissions, or underpayments on those returns. It is important to note that innocent spouse relief is not based on low income; it is typically available to all taxpayers who meet the following criteria:

 

Section 6015(b) Relief:

1. Error or Fraud: You must prove that the tax issues on the joint return were due to your spouse’s deception, underreporting, or fraudulent activities. Some errors might be unreported income, incorrect deductions or credits, or incorrect values given for assets.
2. No Knowledge: You can demonstrate that you had no knowledge or reason to know about the errors or omissions at the time of signing the joint return. However, there are exceptions for victims of domestic abuse. In those cases, you may be eligible for relief even if you knew about the error but signed the return out of fear, pressure, or threats.
3. Equity and Fairness: It would be unfair to hold you responsible for the tax debt created by your spouse.

 

Section 6015(c) Separation of Liability:

This form of innocent spouse allows relief from paying your spouse’s share of understated taxes on a joint return if you are no longer married or living together. The remaining factors considered are similar to those used for traditional innocent spouse relief.

1. No Longer Married or Living Together: You must be legally separated, divorced, or widowed OR you have not been members of the same household for the entire 12 months before requesting relief.

Note: To qualify for Section 6015(b) or (c) relief, you must request the relief within 2 years from when the IRS begins specific types of collection activity such as: Files a Notice of Intent to Levy or uses your refund from another tax year to pay the debt.

6015(f) Equitable Relief:

Equitable relief may relieve you from paying taxes if your spouse understated or underpaid taxes due on your joint tax return, and it would be unfair to hold you responsible. Equitable Relief is only available if you do not qualify for 6015(b) Relief or Separation of Liability. However, it shares many of the same factors as the other forms of relief.

1. Spouse’s Income and Assets: Equitable Relief generally only applies to taxes due on your spouse’s income and assets.
2. Your Income and Assets: Some exceptions will allow relief for your own income and assets. These exceptions are that your spouse used funds set aside for taxes for their own benefit without your knowledge, you were a victim of spousal abuse, or your spouse’s fraud led to the unpaid or understated tax.
3. Knowledge: You can’t claim equitable relief for unpaid or unreported taxes if you knew your spouse (or former spouse) would not pay your joint tax liability OR you knew or had reason to know of your spouse’s item that caused a tax understatement.
4. Fairness: To determine eligibility, the IRS will see if holding you liable for unpaid or underreported tax is fair. Factors considered are (1) marital status, (2) economic hardship, (3) knowledge, (4) legal obligation to pay the taxes, (5) your benefit from the unpaid taxes, (6) complied in good faith with tax laws after requested, and (7) your health.

 

Injured Spouse Relief

Injured spouse relief, on the other hand, is designed for couples who file joint tax returns and expect to receive a refund but have outstanding debts or obligations that could offset that refund. Injured spouse relief protects an individual’s portion of the refund from being used to satisfy their spouse’s separate debts (you cannot be responsible for the debt). To qualify for injured spouse relief, consider these factors:

1. Joint Return: You must have filed a joint tax return with your spouse.
2. Past-Due Obligations: Your spouse must have past-due debts for which your refund was applied. Overdue debts include past-due child support, debts to federal agencies, state income tax obligations, or state unemployment compensation debts.
3. Allocation: The IRS will allocate the refund between the injured spouse (you) and the spouse with the outstanding debts. Your refund portion is protected and will not be used to offset your spouse’s debts.
4. Time: File Form 8379 within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. If you did not file a return, you must file within 2 years of the tax payment date.

Innocent spouse and injured spouse relief are essential safeguards for taxpayers facing unique challenges in their joint tax returns. Understanding these options can help ensure you receive the tax relief you deserve while navigating the complexities of the tax system.

If you have questions or would like to consult with an attorney, contact the Indiana Legal Services Low Income Taxpayer Clinic at tax.clinic@ilsi.net or (812) 339-7668.

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Eli Nahmias,
Low Income Taxpayer Clinic Law Clerk