If you file a joint federal income tax return, both you and your spouse are jointly and individually responsible for any tax, penalty and interest due on the return. You are responsible not only for the tax liability shown on the joint return but also any additional tax liability the IRS determines to be due. For example, if income was not reported or was underreported, or if deductions or credits were overstated or were claimed without qualifying for them, the IRS could determine that there is an additional tax liability.
According to the IRS, one spouse can be held responsible for all the tax due, even if the other spouse had all the income. And the joint and individual responsibility continues after a divorce. This responsibility applies even if your divorce decree specifies that your former spouse assumes the responsibility for any tax due on joint returns filed previously.
There are cases in which you can obtain relief from responsibility for items incorrectly reported on a joint return by your former spouse. The IRS provides different types of relief: innocent spouse relief, separation of liability, equitable relief, and relief from liability arising from community property law. To claim any of these types of relief, you need to file Form 8857 – Request for Innocent Spouse Relief.
Innocent spouse relief
You may qualify for innocent spouse relief if you filed a joint return that has an understatement of tax due to items erroneously reported, or not reported by your spouse. You must be able to establish that when you signed the joint return, you did not know and had no reason to know of the errors that caused the understatement.
The IRS will take into consideration all the facts and circumstances in determining whether it would be unfair to hold you liable for the tax. As indicated on BackTaxesHelp.com, these circumstances include whether you received any significant benefit from the understatement of tax, whether you were abandoned by your former spouse, and whether you are divorced or separated.
Separation of liability
As explained on Lawyers.com, the separation of liability is proportionate relief, in which liability is limited to the amount that can be properly allocated or traced to the spouse who requests the relief. To qualify for the separation of liability relief, you must be divorced or legally separated and must not have lived in the same household as your former spouse at any time during the 12 months before you request the relief.
Equitable relief
The IRS may grant equitable relief if it determines that it would be unfair to hold you liable for a tax obligation. You could qualify for equitable relief if you didn’t realize there were errors on your return when you filed it, there was no intent to commit fraud, you did not transfer assets between you and your spouse for the purpose of avoiding taxes, and the tax problem was the fault of your spouse.
Community property relief
If you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), the relief you can request depends on whether you filed a joint return or separate returns. As explained on Fairmark, when you file separate returns you generally have to report half of the community income, which includes the income generated by community property, and the entire amount of the income that is considered your separate income.
If you file a joint return
If you file a joint return in a community property state, you are jointly and severally liable for the tax obligation, just as you would be in a common law state. Community property laws are not taken into consideration in determining whether an item reported on your tax return belongs to you or your spouse for purposes of granting relief from tax obligations.
If you file separate returns
If you file a separate return and the IRS determines that the community property earned by your spouse is more than the amount reported on his or her separate tax return, you could be held liable for tax on your share of that community income. But you may be able to obtain relief if the community income you did not include is your former spouse’s wages, salary or compensation, income from your former spouse’s sole proprietorship business, his or her distributive share of partnership income, or income from your former spouse’s property that is separate under community law.
In order to qualify for this relief, you must not have known of that community income nor had reason to know of it, and it would not be fair to include the community income in your gross income.
Sources:
Divorce: Tax, Innocent Spouses & Community Income – Lawyers.com
Form 8857 – Request for Innocent Spouse Relief
Innocent Spouse Relief – IRS
Innocent Spouse Relief and Community Property – IRS
Innocent Spouse Tax Relief – BackTaxesHelp.com
Instructions for Form 8857 – IRS
Key Thomas, “Relief from Spousal Liability – Community Property States” – Fairmark
Publication 971 – Innocent Spouse Relief – IRS
