Spousal Tax Relief for Joint Tax Return Errors
Marriages are not short of difficult choices. You have to discuss and agree about every small and huge decision including where to go on holidays, whose family you are going to be spending Thanksgiving with, and whether you will pay your taxes jointly or separately. Are you among the more than 90% of American couples who file joint returns? Filing joint returns has its benefits and so does filing returns separately. Both choices also come with risks.
The risks and benefits of filing joint returns
One of the major benefits of filing taxes jointly is that you enjoy various tax deductions and breaks. Joint filing can save you lots of money in the name of taxes. When you file separately, you may end up paying more taxes. Joint returns are, however, not without their downs. The most common issue with couples who file joint returns is that they end up seeking help from tax relief programs due to cases of intentional or unintentional wrongful filing by their spouses.
The issue of tax relief among spouses
When you file taxes jointly, you will be 100% jointly responsible for all your tax liabilities and occupations spouse even if one of you does not have a job. There are several reasons why couples end up seeking tax relief. One of the most common reasons is when one of you unintentionally files incorrect taxes. Further, if you were married at the time of paying tax but ended up divorcing or you find yourself in the midst of a separation process during the tax season, you may seek tax relief.
Another circumstance where tax relief may be necessary is where your spouse withholds some of their income information from you illegally. If you are living with an abusive or untrustworthy spouse, you may also find yourself in trouble with your taxes. Some spouses will forge your signature on tax documents or file tax documents behind you back. In all these cases, you will have to ask for tax relief.
Types of income that warrant spousal tax relief
You may ask for tax relief for income that you have earned from employment or self-employment, but never from payments where you share responsibility or household employment taxes. For you to be considered for spousal tax relief, you have to file your case within 2 years after the IRS collects taxes.
The process can be quite lengthy and can take 6 months or more, so you should be patient. If the IRS rejects your request for relief, you can appeal their decision within 30 days of receiving the notice.
Three types of spousal relief
There are three types of spouse relief. These are innocent spouse relief, separation of liability relief, and equitable relief.
- Innocent spouse relief
In innocent tax relief, you see tax relief after signing a tax return which whose tax was understated, and you were not aware or had no way to know that it was understated. The erroneous items could be due to wrongful reporting by your spouse or former spouse. It includes items such as unreported income or a wrongful deduction made.
- Separation of liability relief
This happens when your spouse wrongfully reports items on your tax return which leads to an understatement of tax, and then you separate or get divorced from your spouse. If granted this kind of relief, you will be able to separate the tax owed and pay only your share of tax. For a separation relief to be viable, you must have been part for more than 12 months. You must not have benefitted in any way from the tax understatement.
- Equitable relief
Equitable relief also deals with an understatement in the joint tax return which is the doing of your spouse. It also applies if the tax return is correct but you have not paid the entire obligation. You can seek equitable relief if you do not qualify for the two types of tax relief above.
Whenever you are seeking spousal tax relief, ensure you have some actual proof to back up your claims. You may not know which kind of documentation you should include, hence the need to consult a tax professional who deals with tax relief to help you with your application.