What is innocent spouse relief?

Don’t pay more tax because of your spouse’s mistakes

Derek Silva

Derek Silva

Published March 25, 2020

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KEY TAKEAWAYS

  • Joint filers are each equally responsible for the information on their tax return because of joint and several liability

  • Innocent spouse relief applies when you owe additional money for a previous return because your spouse didn’t report all their income or erroneously claimed tax breaks

  • IRS Form 8857 allows you to request innocent spouse relief

  • There are two other types of spousal relief you may qualify if you can’t get innocent spouse relief

Married couples receive certain tax benefits when they file a joint federal income tax return. For example, nearly all tax credits and deductions have higher income limits for married couples filing jointly than for single filers. However, when a married couple files a joint tax return, each spouse is legally responsible for everything listed on that return. This is called joint and several liability and applies to all joint returns, even if you later divorce or legally separate.

If your spouse doesn’t report all their income on your tax return or if your spouse makes errors that result in you not paying enough tax, you are both equally responsible for the unpaid tax. But if you only owe that tax because of errors made by your spouse (including tax fraud) and you did not know that the information on your federal tax return was inaccurate, innocent spouse relief can protect you from having to pay your spouse’s tax.

To file for innocent spouse relief, you must complete Form 8857 and mail it to the IRS. You generally have two years to file this form, starting from when the IRS first contacts you about the additional tax you owe. If you don’t qualify for innocent spouse relief but feel it is unfair for you to pay additional tax, you may qualify for separation of liability relief or equitable relief.

In this article:

What is innocent spouse relief?

If you previously filed a joint tax return and the IRS says you actually owe more tax than what you reported, you have what's called an understated tax. You and your spouse are equally liable to pay that tax because spouses filing jointly have joint and several liability. Innocent spouse relief protects you from paying an understated tax that was the result of your spouse either failing to report all their income or incorrectly claiming a tax credit or deduction.

If you request relief before paying the understated tax, the IRS simply won’t require you to pay it. If you have already paid the tax and then the IRS grants you innocent spouse relief, you will receive a refund for the appropriate amount.

Innocent spouse relief also protects you from having to pay any interest, late fees, or other penalties that result from your understated tax. If some of the understated tax is not the fault of your spouse and the IRS does not grant you relief, you are still responsible for paying the interest and penalties on that portion of the tax.

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If you live in a community property state, you may be liable for your spouse’s understated tax even if your filing status is married filing separately or head of household. You won’t qualify for relief from innocent spouse relief, but you may still qualify for equitable relief, which we discuss later.

What exactly is an understated tax?

Understated tax is any tax you owe the IRS that you did not report on your tax return. For example, if you stated on your tax return that the total tax you owed was $4,000 but the IRS determines that you actually owed $4,250, then you have understated tax of $250.

An understated tax is sometimes the result of a simple mistake, like when you have income on multiple 1099 forms and simply forget to include one.

The IRS will send you a notice if it finds that you have an understated tax. In general, the IRS has 10 years to collect tax that you owe. There is a 10-year statute of limitations on collections. Once you pay the amount you owe, plus any applicable fees and interest, your understated tax is resolved and there likely won’t be any further negative consequences.

Keep in mind that you can only have understated tax if you actually filed your tax return. Failing to file a return will still result in unpaid taxes and potential penalties, but you won’t have understated taxes. Learn more about what happens when you don’t file your taxes.

Who qualifies for innocent spouse relief?

There are four conditions you must meet in order to qualify for innocent spouse relief:

  • You filed a joint return.
  • You have understated tax because of your spouse (or former spouse) not reporting all their income or improperly claiming a tax credit or tax deduction. The IRS calls these erroneous items.
  • You can prove that when you signed the tax return, you did not know that the understated tax existed and had no reason to know it existed.
  • It is unfair for the IRS to hold you liable to pay the tax.

Keep in mind that if you do not qualify for innocent spouse relief, you may still qualify for another type of spousal relief, which you can read about in a later section.

Understanding erroneous items

An erroneous item on your tax return can happen in two situations:

  • Your current of former spouse has unreported income.
  • Your current of former spouse claims an incorrect tax credit, tax deduction, or cost basis. This includes claiming the incorrect amount for a credit you do qualify for. Cost basis is the value of an asset or investment used to determine how much capital gains tax you owe.

To qualify for spouse relief, your current or former spouse must be completely at fault for erroneous items that result in an understated tax. If you are also at fault, like if you claim the child tax credit for a child that is ineligible for that deduction, then will not qualify for innocent spouse relief.

Did you know the understated tax existed?

You cannot qualify for relief if the IRS finds that you had direct knowledge of the understated tax. The IRS calls this actual knowledge. For example, if you knew that you and your spouse had made $5,000 in charitable contributions during the year but then claimed on your tax return that you had made $7,000 in contributions, you will not be able to get innocent spouse relief.

You also cannot qualify if the IRS finds that it’s reasonable for someone in your situation to have known about the understated tax, even if you personally did not know. As an example, let’s say you sold a house that you and your spouse jointly owned. You bought the house for $250,000 (your cost basis) but you claim on your tax return that your cost basis in the house was $200,000. Even if your spouse handled everything when you purchased your home and you were unsure of the exact purchase price, it’s reasonable that you could have known. The IRS is likely to say you do not qualify for innocent spouse relief.

When is it unfair for the IRS to hold you liable?

The IRS will consider your entire situation to determine if it’s fair to hold you liable to pay the understated tax. The tax form to apply for relief is long because it allows you to detail your entire situation to show that it’s unfair to hold you liable. Here are some factors the IRS may consider:

  • Did you receive a significant benefit (like a cash payment or the transfer of property) either directly or indirectly from the understated tax? A simple example of this is if your spouse didn’t report income from a job and then made a payment to you worth half that income.
  • Did you benefit from the return on an understated tax? For example, did you earn more investment income by reporting a lower cost basis than you should have?
  • Did your spouse desert you?

How to apply for innocent spouse relief

Applying for innocent spouse relief requires you to complete IRS Form 8857, Request for Innocent Spouse Relief. The form is long because it asks many questions about why you’re asking for relief and what your current financial situation is. The IRS will consider your entire situation before making a decision. According to the IRS, completing Form 8857 could potentially take you more than two hours.

Note that if you file for spousal relief, the IRS will notify your spouse of your request.

When to apply for innocent spouse relief

The IRS will send you a letter notifying you that you have understated tax and need to pay it. With few exceptions, you have two years, starting from the date listed on the first IRS collections notice, to request innocent spouse relief.

If you are in a community property state and you are seeking relief from tax liability that results from a tax on community assets or income, you generally need to file Form 8857 within two and a half years of the due date of your tax return (including extensions). If the IRS begins an examination of your tax return and sends you a letter after two and a half years, you will have 30 days from the date on the initial IRS contact letter to request relief.

Where to mail Form 8857

If using the U.S. Postal Service, mail Form 8857 toIf using any private mailing service, mail Form 8857 to
Internal Revenue Service
P.O. Box 120053
Covington, KY 41012
Internal Revenue Service
201 W. Rivercenter Blvd., Stop 840F
Covington, KY 41011

Do not include Form 8857 when you file your regular tax return to the IRS. (Learn more about how to file your tax return.)

Other types of tax relief for spouses

There are three types of spouse relief on your taxes and you may qualify for one even if you don’t qualify for the others:

  • Innocent spouse relief protects you from paying understated tax if it exists only because of filing errors or omissions made by your spouse.
  • Separation of liability relief allows you to split understated tax between you and your spouse if you two are divorced or legally separated.
  • Equitable relief allows a taxpayer to get tax relief even if they don’t qualify for the other two types of relief. This covers a spouse who signed a tax return under duress, including victims of domestic abuse.

The same tax form, Form 8857, allows you to apply for all three types of relief. You should also follow the same guidelines listed earlier on when to file for separation of liability relief or equitable relief. If you’re requesting equitable relief in the hope of getting a refund, you need to request it within three years of the tax return’s original file date or within two years of receiving a collection notice from the IRS, whichever gives you more time.

Innocent spouse relief vs injured spouse relief

Separately, there is something called injured spouse relief. Injured spouse relief applies if you earned a refund from your joint tax return, but the IRS used your part of the refund to pay your spouse’s tax debt, child support, spousal support, or other federal non-tax debt, including federal student loan debt. This differs from innocent spouse relief, which you cannot use as a way to recoup a tax refund.

You can request relief as an injured spouse by filing Form 8379, Injured Spouse Allocation. Complete this form within three years from the due date of your tax return (including tax extensions) or within two years of the date you paid the tax that the refund was used to offset.

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About the author

Personal Finance Expert

Derek Silva

Personal Finance Expert

Derek is a tax expert at Policygenius in New York City. He has written about multiple personal finance topics in the past, and his work has been covered by Yahoo Finance, MSN, Business Insider and CNBC.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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