Innocent Spouse Law and Legal Definition
Innocent spouse is a term used as a basis for requests for relief from joint and several liability for understatement of income on a joint federal tax return and from liability arising from community property. It generally applies to a spouse who was not aware of the mistake and received no benefit from it. An individual may be found not liable for tax underpayment (including interest, penalties and other amounts) for a tax year if the following conditions are met:
- A joint return was filed for the tax year [IRC §6015(b)(1)(A)];
- There is an understatement of tax on the return that is attributable to an erroneous item by the other spouse [IRC §6015(b)(1)(B)];
- A taxpayer establishes that in signing the return he/she did not know and had no reason to know of the understatement; [IRC §6015(b)(1)(C);
- Taking into account all of the facts and circumstances, it would be inequitable to hold the taxpayer liable for the deficiency attributable to the understatement; [IRC §6015(b)(1)(D)]; and
- A taxpayer elects the benefits of this provision, on the form that the IRS prescribes (Form 8857) , no later than the date that is two years after the date the IRS has begun collection activities with respect to the taxpayer. [IRC §6015(b)(1)(E)]
The following are examples of some of the factors, among others, the IRS will consider:
- Whether you received a significant benefit either directly or indirectly, from the understatement.
- Whether your spouse (or former spouse) deserted you.
- Whether you and your spouse have been divorced or separated.
- Whether you received a benefit on the return from the understatement.
Some states have also enacted similar laws, which vary by state, providing relief for innocent spouse taxpayers.