If the IRS is seeking payment for a tax understatement connected to a joint return filed during your marriage, the separation of liability relief can come in handy. It is applicable for the taxpayers of California or any other state under specific conditions and circumstances. Here are some key points to understand.
What is the separation of liability relief?
When the IRS identifies a tax understatement on a joint return filed during your marriage, it generally holds both parties liable. However, the separation of liability relief allows a qualifying spouse to break that joint obligation. Once approved, the IRS recalculates the liability so that you are only responsible for the taxes generated by your own financial items, while your ex-spouse remains responsible for their own share.
When can you claim it?
IRS expects you to meet certain prerequisites to be eligible for separation of liability relief. The IRS may consider you qualified if:
- You filed joint tax returns with your spouse while you were married.
- Your spouse’s error led to an understatement of tax on the joint returns.
- You were unaware or had no reason to suspect a tax discrepancy when you signed the return.
- Your marriage is dissolved or you don’t live with your spouse.
The statement “you don’t live with your spouse” will be valid only if you and your spouse have lived separately for a minimum of 12 consecutive months before filing.
When might you be ineligible?
The IRS relief is a breather for qualifying individuals. Nevertheless, the IRS will not exempt you from your spouse’s tax due if any of the following apply:
- You have signed either an offer in compromise or a closing agreement with the IRS.
- You previously requested relief and a court denied the request.
- You failed to request the relief during the related court proceeding.
Additionally, if the IRS can prove you had actual knowledge of a specific hidden income source or false deduction when you signed the return, relief will be denied for that specific item, though you may still receive relief for other items you didn’t know about.
Take control of your tax responsibility
Tax problems can linger long after a marriage ends, but separation of liability relief provides a pathway toward a fair resolution. You can start by filing the Form 8857 to claim innocent spouse relief from the IRS. It can help you move forward without carrying the full weight of a joint tax debt.