Innocent Spouse Rule - Explained
What is the Innocent Spouse Rule?
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Table of ContentsWhat is the Innocent-Spouse Rule?How Does the Innocent-Spouse Rule Work?The Lack of Knowledge Clause of the Innocent Spouse RuleAcademic Research on the Innocent-Spouse Rule
What is the Innocent-Spouse Rule?
In the United States, the innocent spouse rule is a provision that grants a spouse relief from penalties of improperly reported tax returns of their spouse. If a spouse is guilty of underpayment of taxes of files tax returns inaccurately, the partner (other spouse) can partake from the penalties of the offenses. In the U.S tax law, the innocent spouse rule protects spouses or relief them from the tax obligations or debts of the other spouse. Also, when a couple file their taxes as a joint return, if a partner inaccurately files the tax return or misreport the taxes, the other spouse is relieved from such burden through the provision of innocent spouse rule.
Back to:ACCOUNTING & TAXATION
How Does the Innocent-Spouse Rule Work?
The innocent tax rule in the U.S tax law allows the Internal Revenue Service (IRS) offer tax relief to innocent spouses in the event of their partner making errors in tax filings or deliberately misreporting taxes. In a joint tax return, there is the possibility of a spouse filing a tax return that can attract penalties, the innocent spouse rule protects the other spouse from penalties and tax obligations resulting from the tax errors made by the other spouse. Not all spouses in the United States qualify for the innocent spouse relief; spouses who qualify must have;
- Filed a joint return that contains errors which relate directly to their spouse.
- No prior knowledge of the error or unreported tax.
When a spouse fails to report certain incomes or inflates tax deductions in a joint tax reporting, it is a tax offense that the IRS frowns against. The innocent spouse rule relief a spouse from tax obligations resulting from the errors of the other spouse. For a spouse to qualify for innocent spouse relief, it is left for the IRS to determine whether they are qualified or not. Such taxpayer can also apply for relief with the IRS. Application for tax relief can be filed on IRS form 8857.
The Lack of Knowledge Clause of the Innocent Spouse Rule
There is a clause in the innocent spouse rule that maintains that a spouse must have no knowledge of the tax error to be qualified for the innocent spouse relief. However, this clause often cause problems when taxpayers apply for innocent spouse relief. In fact, most court rulings maintain that the spouse applying for such relief must have been aware of the error, even if the spouse tries to convince the court otherwise. Therefore, there is always a painstaking scrutiny when it comes to deciding whether the spouse has knowledge of the error or not. In other cases, courts have rules that spouses must be investigated and their tax returns must be reviewed before the innocent spouse relief can be provided. Taxpayers are forced to prove that they were not aware of the error in obedience to the lack of knowledge clause.
Academic Research on the Innocent-Spouse Rule