What Is the Innocent Spouse Rule?

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For married couples, often one of the spouses is self-employed and does not pay their taxes and the other spouse has no idea of ​​overdue taxes. What the IRS doesn't tell you is that only the independent spouse can be held liable for taxes.

This is the basic situation that I have encountered very often in my practice. I will meet a couple who have not paid their taxes to the Internal Revenue Service. A spouse (let's assume that the man) is self-employed and does not pay his taxes. The other spouse (wife) has a regular W2 job and taxes are deducted from his salary. Yet the IRS is suing not only her husband for overdue taxes, but also her.

This can be a classic situation where the wife may be eligible for an innocent spouse determination, which means that she will not be liable for taxes. Most importantly, the IRS cannot privilege or foreclose on its bank accounts or assets to satisfy tax debt.

To be eligible for an innocent spouse's determination, a person must adequately demonstrate to the tax authorities that they had no control over the preparation of the tax return. For example, in our situation, the man (whom we will call John) is the sole owner of his business and has the power to sign checks. John chooses the accountant and is the only one to meet the accountant.

John is the person who provides all the banking information and other tax deductions to the accountant. John is also the person who answers all of the accountant's questions regarding tax preparation. Finally, John is the person who collects the completed tax return and pays the accountant.

The wife (Jane) had no control or influence over the tax preparation process. Additionally, Jane has no control over her husband's affairs and the taxes owed to the IRS can be directly charged to John's self-employment income. In this scenario, Jane would be considered an innocent spouse according to the IRS and held not liable for overdue taxes.

When trying to settle unpaid taxes with the IRS for a married couple, determining the innocent spouse is a very powerful tool to use for a married couple. However, determining if a spouse is eligible can take a long time and it may take the IRS more than a year to decide on a person request. Therefore, it is very important for a person to seek professional help from an experienced tax specialist.


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